SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19265 / June 13, 2005
SEC BRINGS EMERGENCY ACTION AGAINST HEDGE FUND AND ITS UNREGISTERED INVESTMENT ADVISERS
Securities and Exchange Commission v. HKW Trading, LLC, Howard Waxenberg Trading, L.L.C., et al. Case No. 8:05-CV-1076-T-24MSS (M.D. Fla., filed June 9, 2005)
The Securities and Exchange Commission (“SEC” or the “Commission”) announced that on June 9, 2005, it filed an emergency civil action against HKW Trading, LLC (“HKW Trading”), Howard Waxenberg Trading, L.L.C. (“Waxenberg Trading”) and Downing & Associates Technical Analysis, n/k/a The Estate of Howard Waxenberg (“Downing”), in connection with a Ponzi scheme orchestrated by the recently deceased Howard K. Waxenberg (“Waxenberg”) of Bradenton, Florida. The Commission also named HKW Trading Fund I, LLC (“HKW Fund”), a hedge fund, and the Estate of Howard Waxenberg (“Estate of Waxenberg”) as Relief Defendants. On June 9, 2005, the Honorable Susan C. Bucklew, United States District Judge for the Middle District of Florida entered, among other things, an emergency order to temporarily freeze the assets of HKW Trading, Waxenberg Trading, Downing (collectively, “Defendants”), HKW Fund and the Estate of Waxenberg.
The Commission’s complaint (“Complaint”) alleges that from at least 1990 through May 2005, the Defendants raised more than $70 million by offering and selling securities to approximately 200 investors. The Complaint also alleges that Defendants falsely represented to investors that they were day-trading their investments in options and futures and generating approximately 20% annualized returns. The Complaint further alleges that Defendants sent out fictitious account statements to investors that materially overstated the account values in the individual investors’ accounts. Furthermore, the Complaint alleges that Defendants operated a Ponzi scheme by paying out approximately 20% annualized returns to investors, in part, from new investors’ capital. Finally, the Complaint alleges that Waxenberg received more than $1.6 million in ill-gotten gains from investors’ funds.
Upon the SEC’s motion, the Court appointed Burton W. Wiand, Esq., an attorney in the law firm of Fowler White Boggs Banker, as Receiver over HKW Trading, Waxenberg Trading and HKW Fund. Among other things, Mr. Wiand is responsible for taking control of HKW Trading, Waxenberg Trading and HKW Fund and for marshaling and safeguarding their assets.
The Complaint charges Defendants with violating 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 SEC is also seeking, among other things, permanent injunctions against HKW Trading and Waxenberg Trading, disgorgement of ill-gotten profits, civil money penalties against Defendants and an accounting from the Estate of Waxenberg.