U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18959 / November 4, 2004
SECURITIES AND EXCHANGE COMMISSION v. LEARN WATERHOUSE, INC.; RANDALL T. TREADWELL; RICK D. SLUDER; LARRY C. SATURDAY; AND ARNULFO M. ACOSTA, Civil Action No. 04-CV-2037 W (LSP) (S.D. Cal.)
SEC OBTAINS PRELMINARY INJUNCTION, ASSET FREEZE, AND A RECEIVER IN A NATIONWIDE $24.5 MILLION "PRIME BANK" PONZI SCHEME
On November 1, 2004, the Securities and Exchange Commission ("Commission") obtained a preliminary injunction in a multi-million dollar securities fraud scheme perpetrated by five defendants: Learn Waterhouse, Inc. ("LWI"), a Texas corporation based in Jacksonville, Florida and Tyler, Texas; Randall T. Treadwell, 46, of Savannah, Georgia; Rick D. Sluder, 47, of Tyler, Texas; Larry C. Saturday, 57, of Savannah, Georgia; and Arnulfo M. Acosta, 41, of Edinburg, Texas. The defendants have raised at least $24.5 million from the offer and sale of fictitious "prime bank" instruments. The Honorable Thomas J. Whelan, United States District Judge for the Southern District of California, also granted additional relief that the Commission sought, including orders freezing assets, appointing a permanent receiver over LWI, and requiring the defendants to repatriate assets from abroad.
The Commission's complaint, filed on October 12 in federal court in San Diego, alleges that the defendants raised at least $24.5 million from 1700 investors nationwide by conducting a fraudulent prime bank scheme. According to the complaint, LWI pooled investor funds to engage in "buy/sell" transactions in a "secret," "invitation only" bank trading program that generated investor returns ranging from 5% to 50% per month. The defendants represented that one such trading program purportedly earned investors 500% in just 60 days. The defendants also represented that an investor's principal was secured by a "pre-funded, cash-back instrument" issued by a top U.S. bank, which purportedly restricted LWI's bank trading program to completely risk-free transactions.
According to the complaint, these representations were false. The defendants instead were promoting a fictitious prime bank trading program and operating a Ponzi scheme. At least $8.2 million, or 46.9%, of the returns paid to investors came from investor funds. The defendants also misappropriated at least $2.5 million in investor funds to support themselves and finance other businesses. The complaint also alleges that there was no bank trading program, nor were investor funds secured by a "pre-funded, cash-back instrument"; rather, the bank trading program and the extraordinary returns promised by the defendants were part of a prime bank investment fraud.
In its lawsuit, the Commission obtained an order freezing each of the defendants' assets, an order appointing Thomas Lennon as a permanent receiver over LWI, an order requiring the defendants to repatriate assets from abroad, and a preliminary injunction prohibiting all the defendants from future violations of the securities registration and antifraud provisions - Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to the relief already granted by the Court, the Commission will seek permanent injunctions, disgorgement and civil penalties against all defendants.
For more information about prime bank frauds, visit the SEC's "Prime Bank Information Center" at http://www.sec.gov/divisions/enforce/primebank.shtml. To report suspicious activity involving possible fraud, visit http://www.sec.gov/complaint.shtml.