The Securities and Exchange Commission ("Commission") obtained a preliminary injunction on April 5, 2004, in a case alleging a multi-million dollar securities fraud perpetrated by Colin Nathanson, 54, of Coto De Caza, California, and nine of his businesses, eight of which are based in Orange County, California: Nathanson Investment Trust, Giant Golf Company, Play Big Enterprises, Inc., Starquest Management, Inc., Whitehawk Consulting Group, Inc., Leafhead Consultants, Inc., NetTel Consulting Corp., Yrmac Consulting Services, Inc., and Millennium Technical Group, Inc. The Honorable Gary L. Taylor, United States District Judge for the Central District of California, also granted additional relief that the Commission sought, including issuing orders freezing assets and appointing a permanent receiver over the entity defendants and any other entities directly or indirectly controlled by Nathanson.
The Commission's complaint, filed on March 25, 2004, in federal court in Orange County, alleges that since 2001, Nathanson and his companies raised $29.5 million from over 1800 investors nationwide through four fraudulent investment schemes. At the time the Commission filed its complaint, Nathanson was continuing to raise funds from investors in at least two of his schemes. The first of Nathanson's schemes involved selling securities in a golf equipment company he controls, Giant Golf Co., which purportedly was preparing to conduct an IPO. The second scheme was a Ponzi scheme involving several funds that would purportedly purchase air time to air Giant Golf's infomercials. In the third scheme, according to the complaint, Nathanson sold investment interests through the Nathanson Investment Trust in a purported unnamed software company that he claimed would soon be bought-out by a larger, unnamed, company. Finally, the complaint alleges that Nathanson sold securities in a company known as Millennium Technical Group that Nathanson said would exploit certain FCC licenses purchased in 1994. The Commission alleges that in these four schemes, the defendants lied to investors regarding how they would use the investor funds. The complaint alleges that without the investors' knowledge or consent, Nathanson commingled the investors' monies, and used the commingled funds to operate both the unprofitable defendant businesses and his other various unprofitable businesses.
Additionally, the Commission's complaint alleges that since February 2001, Nathanson used at least $1 million of investor funds to support his extravagant lifestyle, including three homes and payment of $346,500 in gambling-related debts. Finally, the Commission alleges that, in Ponzi-like fashion, Nathanson caused over $5 million of the $29.5 million raised to be paid to certain investors either as purported "returns" on their investments when, in fact, their investments were not profitable, or as purported returns of their principal.
The Court's order obtained by stipulation (1) freezes the assets of Nathanson, Nathanson Investment Trust, Giant Golf, Play Big, Starquest, Whitehawk, Leafhead, NetTel, Yrmac, Millennium, and other Nathanson companies; (2) prohibits destruction of documents; (3) appoints a permanent receiver over any entity directly or indirectly controlled by Nathanson; (4) requires accountings; and (5) preliminarily enjoins all of the defendants from future violations of the securities registration and antifraud provisions of the federal securities laws, Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission also seeks permanent injunctions, and other relief, including disgorgement and civil penalties against all defendants.
The Commission previously obtained a temporary restraining order against all defendants. (See Litigation Release No. 18642).
Investors may direct their inquiries to the temporary receiver, Thomas Seaman, at (949) 222-0551, extension 5.