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U.S. Securities and Exchange Commission

Securities and Exchange Commission

Litigation Release No. 17969 / February 5, 2003

SEC Charges Broker Todd Eberhard, and His Firms, With Securities Fraud and Looting of Customer Brokerage Accounts

SEC v. Eberhard, et al. (S.D.N.Y. Civ. 03 CV 813 (RJB))

The Commission announced today that it filed an emergency action this morning charging securities fraud, including looting of customer brokerage accounts, against broker and television investment personality Todd M. Eberhard and his brokerage and investment advisory firms, Park South Securities, LLC ("Park South"), a registered broker-dealer and registered investment adviser, and Eberhard Investment Associates, Inc. ("EIA"), an investment adviser that was not registered with the Commission. The complaint also names Stone House Capital Partners LP ("Stone House"), a Park South affiliated hedge fund, as a relief defendant that received transfers of Park South customer funds at Eberhard's direction.

The complaint alleges that Eberhard and his companies systematically concealed substantial losses in customer accounts by, among other things, issuing phony customer account statements and making other material misrepresentations about the value of the accounts. The defendants also misappropriated customer funds by moving assets back and forth between the accounts of unrelated customers without knowledge or authority of the customers, and by making unauthorized wire transfers out of customer accounts - essentially looting the accounts. The fraud was ongoing: defendants continued to misrepresent the value of customer account balances as recently as last week.

Upon the Commission's application, the United States District Court for the Southern District of New York today entered a temporary restraining order and an order freezing the assets of Eberhard and his entities as well as assets of Stone House that are traceable to Eberhard's customers. The Court also appointed a receiver for Park South and EIA and ordered an immediate verified accounting from all defendants and expedited discovery. The litigation is pending.

The Commission would like to thank the United States Attorney's Office for the Southern District of New York for its assistance and cooperation in this matter.

SEC Complaint in this matter

 

http://www.sec.gov/litigation/litreleases/lr17969.htm

Modified: 02/05/2003