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Securities and Exchange Commission

Litigation Release No. 18128 / May 8, 2003

SEC Sues Fresno Home Builder for Running $5 Million Ponzi Scheme

Securities and Exchange Commission v. Metropolis Holdings, LLC and Edward Gray, United States District Court for the Eastern District of California, Fresno Division, Civil Action No. F-03-5538

On May 1, 2003, the Securities and Exchange Commission charged Edward Gray of Fresno, California, and his company, Metropolis Holdings, LLC, with defrauding investors out of several million dollars since July 2002. According to the Commission's complaint, Gray raised $5.1 million from investors worldwide by offering interests in a non-existent "Asset Management Program." Gray instead pocketed the money, using investor funds to, among other things, buy a new car and travel to Europe. The United States District Court for the Eastern District of California has issued an order freezing all assets held by Gray and Metropolis. In a complaint filed May 1, 2003, the Commission alleges that Gray, a Fresno home builder, told investors that he would use their funds to invest in a $100 million "Leased Asset Management Instrument" promising substantial returns. He further claimed to have obtained an insurance policy guaranteeing the safety of their investments. The Commission's complaint alleges that Gray's representations were entirely false. Gray did not put any money into the supposed investment instruments, nor did he procure any sort of insurance protecting investor funds. Rather, Gray deposited investor funds into a standard brokerage account, withdrawing hundreds of thousands of dollars in cash for himself. The Commission further alleges that Gray spent tens of thousands of dollars of investor funds on trips to Europe, New York, and Las Vegas, a car, jewelry, computers and electronics, and other personal items.

In addition, the Commission's papers show that, upon learning of its investigation, Gray lied to the Commission about the whereabouts of investor funds. Even after agreeing to freeze investor funds pending the Commission's investigation, Gray attempted to wire funds from an account he had concealed from the Commission into his lawyer's bank account. Based on the evidence, the Court issued an order temporarily freezing all of Gray's and Metropolis' funds, requiring an accounting, and prohibiting Gray and Metropolis from destroying documents.

The Commission's complaint charges Gray and Metropolis with violating the antifraud and registration provisions of the federal securities laws, specifically Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The Complaint seeks permanent injunctions prohibiting future violations of the securities laws, disgorgement, and civil penalties.

 

http://www.sec.gov/litigation/litreleases/lr18128.htm

Modified: 05/08/2003