WAYNE M. CARLIN (WC-2114)
UNITED STATES DISTRICT COURT
Plaintiff Securities and Exchange Commission for its Complaint against defendants Anthony Burges and Burges Asset Management, Inc. ("Burges Asset") (collectively, "Defendants"), alleges as follows:
1. This action arises out of a fraudulent offering of securities by Burges and Burges Asset. From at least March 2001 until at least June 2001, Burges offered and sold interests in Burges Capital Partners, LP and Burges Investment Partners, LP (collectively the "Burges Funds"), limited partnerships managed by Burges Asset. In soliciting investors, Burges represented that the Burges Funds would invest and trade in foreign currency, such as Euro and Yen. He also represented that he had been highly successful investing in foreign currency in thepast. In at least one instance he represented that he had achieved returns of about 50% a month.
2. Contrary to Burges's representations, the Burges Funds' assets were not invested in foreign currency. Rather, Burges and Burges Asset misappropriated investor funds. Moreover, Burges had not been highly successful in investing in currency in the past.
3. As a result of Defendants' fraudulent conduct, they raised approximately $136,000 from at least twenty investors.
4. Through this conduct, Burges and Burges Asset have engaged and may be continuing to engage, directly or indirectly, in transactions, acts, practices, and courses of business which constitute violations of Section 17(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. § 77q(a), and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
5. Defendants Burges and Burges Asset, unless enjoined and restrained by this Court, will continue to engage in the transactions, acts, practices and courses of business alleged herein, and in transactions, acts, practices, and courses of business of a similar type and object.
6. By this action, the Commission seeks: (a) permanent injunctive relief;
(b) disgorgement and prejudgment interest; (c) civil penalties; (d) emergency relief including an order expediting discovery, an order prohibiting the destruction of documents, and an accounting; and (e) such further relief as the Court may deem appropriate.
7. The Commission brings this action pursuant to the authority conferred upon it by Section 20(b) of the Securities Act, 15 U.S.C § 77t(b), and Section 21(d) of the Exchange Act, 15 U.S.C. § 78u(d). This Court has subject matter jurisdiction over this action pursuant to Sections 20(d) and 22(a) of the Securities Act, 15 U.S.C. §§ 77t(d) and 77v(a), and Sections 21(e) and 27 of the Exchange Act, 15 U.S.C. §§ 78u(e) and 78aa.
8. Each of the Defendants, directly and indirectly, singly and in concert, has made use of the means or instruments of transportation or communication in interstate commerce, or of the mails, or the facilities of a national securities exchange, in connection with the transactions, acts, practices, and courses of business alleged herein.
9. Burges, age 33, is a resident of New York, New York. Burges is the founder, an owner, and the manager of Burges Asset. Burges graduated from law school in 1997 and passed the New York state bar examination in February 2001 but is not admitted to the bar in New York or any other state. Since graduating from law school, Burges has periodically been employed as a law clerk or tax accountant. As of November 2001, Burges was purportedly working as an independent consultant, providing tax and securities advice.
10. Burges Asset is a Turks and Caicos Island Exempt Company with its principal place of business in New York, New York. Burges Asset is the general partner of the Burges Funds.
11. From at least March until at least June 2001, Burges raised approximately $136,000 from at least twenty investors for the Burges Funds.
12. Burges represented to the investors that the Burges Funds would invest and trade in foreign currency. The limited partnership agreement for each of the Funds, which investors received before they invested, states that the purpose of the Fund is "[t]o invest and trade foreign currencies and transact all business incidental thereto."
13. Burges also induced investors to invest in the Burges Funds by telling them that he had been very successful investing in foreign currency in the past. For example, in an email Burges sent to a prospective investor on June 5, 2001, he stated:
The only thing that you need to do is sign the LP agreement and cut a check. I have been doing this for about 4 months and the returns have been a consistent 50% a month. My initial 10 grand should turn into 640 grand in about 9 months. I know that it sounds incredible - but it is possible.
On the basis of that representation, the investor sent Burges a check for $2,500.
14. Upon information and belief based on the Commission's investigation, Burges did not invest the assets of the Burges Funds in foreign currency. Rather, Burges misappropriated investor funds and has put them to uses not approved by, or disclosed to, investors. Further, Burges also had not been highly successful on his investing in currency in the past and had not earned a 50% rate of return on his prior currency trading.
15. Burges continued to make the same or similar misrepresentations to investors after they invested in the Burges Funds. Specifically, Burges told a number of investors that their investments in the Funds were profitable, and were growing at a rate of return of about 50% permonth. For example, Burges led one investor to believe that his investment of $2,000 had grown to approximately $11,000 over a period of approximately four to five months. And Burges told another investor that her initial investment of $7,000 was worth approximately $40,000 about five months later. Contrary to these representations, the Burges Funds did not earn a 50% rate of return.
16. The facts about the true uses of investors' funds and the returns Burges and the Funds had earned on any currency trading were known to Defendants or readily ascertainable.
CLAIM FOR RELIEF
Violations of Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a),
and Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b),
and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5
17. The Commission repeats and realleges each and every allegation contained in paragraphs 1 through 16, as if fully set forth herein.
18. The interests in the Burges Funds offered and sold by Defendants are securities within the meaning of Section 2(1) of the Securities Act, 15 U.S.C. § 77b(1), and Section 3(a)(10) of the Exchange Act, 15 U.S.C. § 78c(a)(10).
19. From at least March 2001 until at least June 2001, Defendants, directly or indirectly, singly or in concert, by use of the means or instruments of transportation or communication in interstate commerce, or of the mails, in the offer or sale, and in connection with the purchase or sale, of securities (a) employed devices, schemes and artifices to defraud; (b) obtained money or property by means of, and otherwise has made, untrue statements of material fact, and omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (c) engaged inacts, practices, transactions or courses of business which operated or would operate as a fraud or deceit upon the purchasers of interests in the Burges Funds.
20. As part and in furtherance of the violative conduct, and as more fully described above, Defendants knowingly or recklessly made false and misleading statements and omitted to state facts necessary to make statements made not misleading, to investors and prospective investors in the Burges Funds.
21. By reason of the foregoing, Defendants violated Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a), Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, promulgated thereunder, 17 C.F.R. § 240.10b-5.
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that this Court grant relief against Defendants Burges and Burges Asset as follows:
1. Enter a final judgment: (a) permanently restraining and enjoining Defendants from, directly or indirectly, singly or in concert, violating Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a), and Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.; (b) directing Defendants, jointly and severally, to disgorge their ill-gotten gains from their unlawful conduct, plus prejudgment interest thereon; and (c) directing Defendants to pay civil money penalties pursuant to Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d), and Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78u(d)(3).
2. Grant the following emergency relief against Defendants: (a) an order permitting expedited discovery; (b) an order prohibiting Defendants from destroying documents; and (c) an order requiring Defendants to provide promptly a verified accounting.
3. Grant such other and further relief as the Court may deem proper.