Securities and Exchange Commission
Litigation Release No. 17638 / July 30, 2002
SEC OBTAINS FEDERAL COURT ORDER FREEZING ASSETS OF AVENTURA, FLORIDA COMPANY INVOLVED IN AN $87 MILLION SECURITIES FRAUD SCHEME
SECURITIES AND EXCHANGE COMMISSION v. AMERICAN FINANCIAL GROUP OF AVENTURA, INC., DAVID H. SIEGEL AND AMERICAN WEALTH MANAGEMENT OF AVENTURA, INC., Case No. 02-22198-CIV-GRAHAM (S.D. Fla., filed July 24, 2002).
The Securities and Exchange Commission (SEC or the Commission) announced that on July 24, 2002 it filed an emergency federal civil action against American Financial Group of Aventura, Inc. ("AFG"), a Florida corporation, David H. Siegel ("Siegel"), AFG's vice president and director of investments and relief defendant American Wealth Management of Aventura, Inc., a Florida corporation in connection with an alleged fraudulent offer and sale of investment contracts. AFG was in the business of pooling investor money and then using those monies to make secured loans to individuals who pledged restricted stock as collateral. On July 25, 2002, the Honorable Donald L. Graham, United States District Judge for the Southern District of Florida entered, among other things, an emergency order to temporarily freeze the assets of the defendants.
In its complaint and application to the Court for a temporary asset freeze order, the SEC alleged that AFG raised approximately $87 million from investors by selling them investment contracts consisting of fractionalized interests in restricted stock loans through AFG's so-called "Restricted Stock Loan Program." Among other things, the SEC's complaint alleges that AFG enticed investors with promises of high returns with low risk because investments were purportedly over-collateralized with restricted stock. The SEC's complaint further alleges that Siegel, a recidivist securities laws violator, misappropriated investor monies and issued false statements to investors falsely showing high returns when, in fact, the investments were losing value because Siegel was misappropriating the money raised by AFG. The SEC's complaint also alleges that AFG misled investors by failing to disclose in its offering materials and website that Siegel had a long history of securities laws violations, including an injunction entered against him in 1987 for participating in a stock manipulation scheme.
As a result, the Commission charges AFG and Siegel with violations of Sections 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is also seeking, among other things, permanent injunctions, disgorgement of ill-gotten profits and a civil money penalty against AFG and Siegel.