SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17812 / October 29, 2002
FINAL JUDGMENTS OF PERMANENT INJUNCTION ENTERED AGAINST PRINCIPAL OF BROKERAGE FIRM
SECURITIES AND EXCHANGE COMMISSION V. DISCOVERY CAPITAL GROUP, ERIK WALSH, AND JOHN ABRESCH, Case No. 02-60363-CIV-HUCK (S.D. Fla., filed March 14, 2002)
The Securities and Exchange Commission ("SEC" or the "Commission") announced that on October 4, 2002, the United States District Court for the Southern District of Florida entered a Judgment of Permanent Injunction and Other Relief ("Judgment") against Erik Walsh a/k/a Erik Hutton Masters ("Walsh"), the president and CEO of Discovery Capital Group, Inc. ("Discovery Capital"), a broker-dealer registered with the Commission since 1992. The Judgment against Walsh, entered by his consent and without admitting or denying the allegations of the Commission's Complaint, enjoins Walsh from violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder. In addition to enjoining Walsh, the Judgment also provides for disgorgement and the imposition of a civil money penalty, in amounts to be determined by the Court after an evidentiary hearing, scheduled for December 2002.
On March 14, 2002, the SEC filed an emergency action against Walsh and others seeking to enjoin the ongoing fraudulent offering of securities issued by Discovery Capital in the form of promissory notes and preferred stock. The Complaint alleged that from at least June 2001 through the filing of the action, Discovery Capital raised at least $2.7 million through the use of a network of primarily unlicensed sales agents using high pressure sales tactics and making misrepresentations about, among other things, Discovery Capital's growth, its affiliations with well-known brokerage firms and other institutions, and the safety of the investments. The Complaint further alleged that Walsh misappropriated investor proceeds through the use of an "off the books" account in the name of Discovery Capital.