U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Rel. No. 18456 / November 14, 2003
SEC v. Koji Goto (United States District Court for the District of New Hampshire, C.A. No. 03-490-JD, filed November 14, 2003)
Commission Obtains Temporary Restraining Order and Asset Freeze Against New Hampshire Resident in Connection with Fraudulent Investment Schemes
The Commission announced today that it has obtained a temporary restraining order, asset freeze, and other emergency relief in a civil fraud action filed against Koji Goto, a Japanese citizen who resides in Bedford, New Hampshire. The Commission's complaint, filed in New Hampshire federal district court, alleges that Goto perpetrated two fraudulent investment schemes beginning in 2002, and has misappropriated approximately $5 million from investors. The Commission also obtained an asset freeze against Goto's wife, Shaleen Cassily, concerning her receipt of some proceeds of Goto's fraud.
According to the Commission's complaint, in the first scheme, Goto made fraudulent misrepresentations to obtain investments in a Boston, Massachusetts-based hedge fund. Among other things, the complaint alleges that Goto falsely stated to investors that he had previously managed a portfolio of client assets totaling between $250 and $300 million, that he would personally invest between $6 and $7 million in the hedge fund, that the hedge fund was profitable, and that he made investment decisions on behalf of the hedge fund. According to the complaint, at least 10 investors gave money to Goto to invest in the hedge fund, but instead of placing investor funds in the hedge fund, Goto diverted the funds to bank accounts controlled by him for his own personal gain. The complaint alleges that in the second scheme, Goto again made fraudulent misrepresentations to obtain investments in a purported hot dog stand vending business. Among other things, the complaint alleges that Goto falsely stated to investors that he had an exclusive contract to manage hot dog vending stands at Home Depot stores throughout the United States and that investors should expect a minimum return of 500% after two or three years. According to the complaint, at least 5 investors gave money to Goto to invest in this scheme, and again, instead of investing the funds in the business, Goto diverted those funds to bank accounts controlled by him for his own personal gain.
The Commission alleged in its complaint that Goto violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission also named as a relief defendant Goto's wife, Shaleen Cassily. The complaint alleges that Goto transferred at least $1.4 million of investor funds to a brokerage account in the name of Cassily, and that Goto and Cassily transferred their joint ownership interest in a Bedford, New Hampshire house worth millions of dollars to Cassily as sole owner.
The Commission asked the court to enter emergency relief against Goto on the grounds that his fraud is ongoing because he continues to hold investors funds, and as recently as November 12, 2003, has been contacting investors in an attempt to obstruct the investigation into his conduct. The Commission obtained entry of an order temporarily restraining Goto from directly or indirectly continuing to violate the federal securities laws, and an asset freeze against Goto and Cassily. The court also granted other emergency relief, including repatriation of all assets obtained from investors that may presently be located outside of the United States, an order prohibiting the destruction of relevant documents, and an accounting to identify, among other things, all assets of Goto or Cassily over $1,000 in value and all transfers of assets by Goto or Cassily over $1,000 in value. The hearing on the Commission's motion for a preliminary injunction is scheduled for December 3, 2003.
The Commission acknowledges the assistance of the New Hampshire Attorney General's Office in its investigation. On November 13, 2003, the New Hampshire Attorney General's Office arrested Goto on related criminal charges.