SEC Charges Two Northern California Residents in $40 Million Ponzi Scheme
FOR IMMEDIATE RELEASE
Washington, D.C., March 11, 2009 — The Securities and Exchange Commission today charged Northern California residents Anthony Vassallo and Kenneth Kenitzer for orchestrating a multi-million dollar investment fraud. Vassallo agreed to a court order freezing his assets. The SEC is seeking an emergency court order to also freeze the assets of Vassallo's company, Equity Investment Management and Trading, Inc. (EIMT).
According to the SEC's complaint, Vassallo and Kenitzer raised more than $40 million from about 150 investors from approximately May 2004 to November 2008. Vassallo told investors, many of whom he met through his church, that he had a proprietary computer software program that allowed him to buy and sell stock options and generate returns of 3.5 percent per month with little risk of loss. The SEC alleges that Vassallo and Kenitzer instead used investors' money for unauthorized purposes, including a variety of other schemes never disclosed to investors.
"Today's action reaffirms that the SEC will take immediate steps to preserve assets for investors victimized in fraudulent investment schemes," said Marc Fagel, Director of the SEC's San Francisco Regional Office. "The defendants' deception went so far as fabricating computer 'screen shots' for investors that purported to show more than $50 million in securities holdings, when in fact they had completely emptied the brokerage accounts."
The SEC's complaint, filed in federal court in Sacramento, alleges that Vassallo told investors that their money was being invested in securities pursuant to a proprietary trading strategy that promised high returns with minimal risk. From September 2007 through approximately November 2008, Kenitzer, who participated in EIMT's day-to-day operations, posted false trading results on the company's Web site and distributed phony investment reports to investors that led them to believe EIMT was achieving consistent, positive returns. According to the SEC's complaint, EIMT actually had not conducted any stock trades since at least September 2007, when its brokerage firm terminated Vassallo's trading privileges. The SEC alleges that Vassallo and Kenitzer kept the scheme going by using money raised from new investors to pay earlier investors, a classic hallmark of a Ponzi scheme.
The SEC's complaint charges Vassallo, Kenitzer and EIMT with violations of the anti-fraud provisions of the federal securities laws. In addition to an emergency order freezing EIMT's assets, the SEC seeks injunctive relief, disgorgement of defendants' ill-gotten gains, and financial penalties.
The SEC acknowledges the assistance of the United States Attorney's Office, Federal Bureau of Investigation, and Internal Revenue Service.
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Marc J. Fagel
Regional Director, SEC's San Francisco Regional Office
Michael S. Dicke
Associate Regional Director, SEC's San Francisco Regional Office