U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18539 / January 13, 2004
SECURITIES AND EXCHANGE COMMISSION v. ZARRAR SHEIKH, NASSER A. DAWOUD, OPULENTICA, LLC AND RELIEF DEFENDANT SAIMA SHAHZADI Civil Action No. 03 Civ 10165 (RJH) (S.D.N.Y., filed December 23, 2003)
SEC OBTAINS PRELIMINARY INJUNCTIVE RELIEF AGAINST ZARRAR SHEIKH, OPULENTICA, LLC AND RELIEF DEFENDANT SAIMA SHAHZADI, AND A PARTIAL FINAL PERMANENT INJUNCTION JUDGMENT AGAINST NASSER A. DAWOUD
At a hearing on January 9, 2004, United States District Judge Richard J. Howell of the Southern District of New York granted the Securities and Exchange Commission's motion for a preliminary injunction and other relief against defendants Opulentica, LLC ("Opulentica"), Zarrar Sheikh ("Sheikh") and relief defendant Saima Shahzadi ("Shahzadi"). The defendants and relief defendant filed no opposition to the SEC's motion and ultimately consented to the relief. The court also granted the SEC's motion for a partial final consent permanent injunction and other relief against defendant Nasser A. Dawoud.
The January 9, 2004 order continues in place various forms of interim relief initially ordered by the court on December 23, 2003, when the court granted the Commission's motion for a temporary restraining order, freezing the assets of the defendants and relief defendant, prohibiting the destruction of documents, granting expedited discovery and other relief to halt the fraud perpetrated by the defendants.
Among other things, the January 9, 2004 order preliminarily enjoins Opulentica and Sheikh from committing future violations of the registration provisions, Sections 5(a) and 5(c) of the Securities Act of 1933, and of the antifraud provisions, Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, the January 9, 2004 order: (a) continues the freeze over the assets of the defendants and relief defendant; (b) directs the defendants and relief defendant to repatriate funds transferred to offshore accounts; (c) prohibits the destruction of documents; (e) imposes a limited stay of discovery and stays the time the defendants and relief defendant to respond to the Commission's complaint pending resolution of the criminal investigation; and (f) prohibits the defendants and relief defendant from all contact with investors. The order, however, allows the Commission to take third-party discovery during the pendency of the stay.
The SEC's complaint filed on December 23, 2003, alleges that, between March 2002 and the present, Opulentica, Sheikh and Nasser A. Dawoud ("Dawoud") fraudulently raised over $500,000 by making material misrepresentations to actual and prospective investors concerning monthly and annual returns on investments, investments risks, and the existence of "insurance" to protect against investment losses.
The SEC's complaint named the following defendants and relief defendants:
Opulentica, a New York limited liability corporation that was formed on or about May 21, 2002, and whose purported office was located at 44 WallStreet, New York, New York. Opulentica has operated a website, though which it offered to investors and potential investors a purported guaranteed return of 6% (which it claimed would yield an annual return of 72%) on short-term investments.
Sheikh, age 33, was the registered agent of Opulentica and was identified as the contact person in Opulentica's advertisements in the "Weekly Pakistan News" and the "Pakistan Post" and as media relations contact in offering materials.
Dawoud, age 31, resides in Brooklyn, New York. In a bank account opening Statement, Dawoud held himself out to be the president of Opulentica.
Relief Defendant, Saima Shahzadi, is Sheikh's wife and received at least $56,200 in investor funds from Opulentica's bank accounts.
Further, the SEC's complaint alleges that:
As of December 9, 2003, the defendants raised approximately $538,000 from about twenty (20) investors in Opulentica. The defendants solicited investors to open accounts with Opulentica for periods of 3, 6, 9, and 12 months.
Opulentica promised investors returns of 6% monthly or, as described in the offering, 72% returns annually. Opulentica's website boasted that offered investors "the maximum gain with the minimum of risk exposure" and "extensive insurance coverage" over all of its accounts. In its offering materials, Opulentica listed fifteen individuals, including Sheikh, who it claimed constituted "a staff of dedicated, professional, and licensed financial analysts.
In truth, Opulentica was an ongoing fraud. Opulentica never generated profits of 6% per month. In fact, of the $538,000 raised, the defendants actually invested only $289,000 in reckless day trading through which the defendants lost over $117,000.
Opulentica's trading accounts were not protected by insurance and investments in Opulentica's were not "risk-free." The defendants also failed to disclose that they had diverted $249,000 of investor funds for their personal use and that of Shahzadi.
The litigation is pending.
See also Litigation Release No. 18526 (December 29, 2003).