U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19246 / June 1, 2005
Securities and Exchange Commission v. Joseph A. Ferona Jr., et al., 05 CV-621 (WM) (D. Col. 2005)
On May 31, 2005, the Commission filed its First Amended Complaint in the United States District Court for the District of Colorado adding new fraud claims against Joseph Ferona and Castle Rock Trading Company under Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Investment Advisers Act of 1940. The First Amended Complaint seeks permanent injunctions against future violations of these provisions, adds a claim for disgorgement against Joseph Ferona and Castle Rock Trading Company, and names Cheryl L. Ferona as a relief defendant and seeks disgorgement from her. The Commission also filed a motion to extend the asset freeze beyond its June 3, 2005 expiration date and for an order requiring Joseph Ferona to surrender his passports.
In the First Amended Complaint, the Commission alleges that Ferona has been operating a Ponzi scheme, using new investor money to pay purported returns to old investors. The amended complaint also alleges that Ferona lost over $1.05 million in trading various investments from October 2003 to March 2005 and that Ferona used approximately $500,000 of investor funds for cash withdrawals and to make personal purchases, including a $120,000 down payment on a house he bought in 2005.
The Commission's original complaint, filed April 5, 2005, alleged, among other things, that Global Prosperity Fund was unlawfully operating as an unregistered investment company and that Ferona and Castle Rock Trading Company were unlawfully operating as unregistered investment advisers. The complaint also alleged that Ferona, Castle Rock Trading, and the Global Prosperity Fund did not comply with their statutory duty to allow a compliance examination. Ferona was preliminarily enjoined by consent on April 6, 2005. On May 4, 2005, the Court granted the Commission's motion for an asset freeze. For further information, see Litigation Release No. 19220 (May 6, 2005), Litigation Release No. 19192 (April 19, 2005), and Litigation Release No. 19167 (April 5, 2005).