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UNITED STATES DISTRICT COURT
COMPLAINT Plaintiff Securities and Exchange Commission ("Commission"), for its Complaint against Defendants Ace Payday Plus, LLC, d/b/a Ace Payday Plus II, LLC, ("Ace Payday"); Ace Payday Management, Inc. ("Ace Management Inc.); Ace Management, LLC ("Ace Management"); and James Bianco ("Bianco"), alleges as follows: 1. The Commission brings this action to halt the fraudulent offer and sale of unregistered securities in Ace Payday, a start-up company purportedly offering check cashing and payday advance services. Over the past several months, Ace Payday, Ace Management Inc., Ace Management, and Bianco, have sought to raise $1 million purportedly to develop Ace Payday's business by offering 100 limited liability units in Ace Payday at $10,000 per unit. The defendants have conducted the offering through unregistered broker dealers operating as telemarketers (called "independent sales offices" or "ISOs"), who solicit unsophisticated investors. By means of offering materials that tout check cashing as possibly "the fastest growing industry in America today," defendants have raised at least $800,000 from at least 30 investors. The defendants have promised investors annual returns of "20% and above," payable quarterly for three years, plus a pro-rata portion of Ace Payday's profits, estimated to be up to 360% to 720% per year. 2. In truth, the defendants have defrauded actual and prospective investors by making a number of major misrepresentations. First, defendants have blatantly misrepresented the use of investor proceeds. The offering materials state that 10% of the offering proceeds will go to the ISOs as sales commissions and that the remaining 90% will be used by Ace Payday. In fact, however, Ace Payday agreed to and did pay commissions of 40% to 45% to the ISOs and has realized only a portion of the $800,000 raised from investors. Second, the defendants have misrepresented expected returns on the investment. Ace Payday's promise of 20% annual returns (5% per quarter) and projections of profits up to 720% per year are wholly unsubstantiated, unachievable and fraudulent. Ace Payday has no operating history to support these wildly optimistic projections and - indeed - already has fallen behind on the quarterly returns promised to investors. To halt the fraud, and prevent the dissipation of investor assets, the Commission seeks, in addition to permanent relief, emergency relief including a temporary restraining order, a preliminary injunction, an asset freeze, an accounting, and an order providing for expedited discovery and preventing the destruction of documents. 3. Ace Payday, Ace Management Inc., Ace Management, and Bianco, directly or indirectly, have engaged, are engaging and are about to engage in transactions, acts, practices and courses of business that constitute or would constitute violations of Sections 5(a), (c) and 17(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. §§ 77e(a), 77e(c) and 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 promulgated thereunder, 17 C.F.R. § 240.10b-5. 4. Unless they are temporarily restrained and preliminarily and permanently enjoined, Ace Payday, Ace Management Inc., Ace Management, and Bianco will continue to engage in the transactions, acts, practices and courses of business set forth in this Complaint and in transactions, acts, practices and courses of business of similar type and object. JURISDICTION AND VENUE 5. 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), seeking to temporarily, preliminarily, and permanently restrain and enjoin Ace Payday, Ace Management Inc., Ace Management, and Bianco from engaging in the transactions, acts, practices and courses of business alleged herein. The Commission also seeks an order freezing defendants' assets pending the resolution of this action, directing defendants to account for their ill-gotten gains, ordering expedited discovery and preventing the destruction of documents. In addition, the Commission seeks a final judgment ordering Ace Payday, Ace Management Inc., Ace Management, and Bianco to disgorge their ill-gotten gains and to pay prejudgment interest thereon, and imposing such other relief as is just and equitable. Last, the Commission brings this case 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), seeking a final judgment imposing civil penalties on Ace Payday, Ace Management Inc., Ace Management, and Bianco. 6. Ace Payday, Ace Management Inc., Ace Management, and Bianco, directly and indirectly, have made use of the means or instruments of transportation or communication in, and the means or instrumentalities of, interstate commerce, or of the mails, in connection with the transactions, acts, practices and courses of business alleged herein. Certain of the transactions, acts, practices and courses of business occurred within the Southern District of Florida. DEFENDANTS 7. Ace Payday is a Florida limited liability company that was formed on May 22, 2001. Ace Payday is headquartered in North Miami Beach, Florida and is engaged in the business of owning and operating a check cashing/payday advance store. 8. Ace Management is identified in the offering materials as a Florida limited liability company. The offering materials identify Ace Management as Ace Payday's "Manager" and describe it as "a professional payday advance and check cashing Management Co." 9. Ace Management Inc. is a Florida Corporation headquartered in the same location as Ace Payday in North Miami Beach, Florida. Ace Management Inc. was formed on May 22, 2001. Ace Management Inc. is identified on Ace Payday's filings with the Florida Department of State as the LLC manager for Ace Payday. 10. Bianco, (age unknown), resides in North Miami Beach, Florida. Bianco is the only known officer of Ace Payday, Ace Management, and Ace Management Inc., and therefore controls Ace Payday, Ace Management, and Ace Management Inc. Bianco, acting through Ace Payday, Ace Management and/or Ace Management Inc., prepared the offering materials. THE FRAUDULENT SCHEME The Offering 11. Ace Payday holds itself out as a start-up, South Florida company in the business of providing consumers with "retail payday advance" and "check cashing" services. Purportedly to raise capital to fund these operations, since at least August 2001 through March 2002, Ace Payday, Ace Management, Ace Management Inc., and Bianco have been offering and selling unregistered units of Ace Payday through a purported private placement. Through the offering, defendants have been attempting to sell 100 units of Ace Payday at a purchase price of $10,000 per unit to raise a total of $1 million. The defendants have solicited investors through the ISOs, who are telemarketers that cold-call unsophisticated investors and are not registered as broker-dealers with the Commission. Through the offering, defendants have raised at least $800,000 from at least 30 investors. 12. The defendants have conducted the offering by means of offering materials consisting of: (a) an undated document entitled "Operating Agreement and Business Plan of Ace Payday Plus II, LLC" ("Operating Agreement and Business Plan"); (b) an undated document entitled "Subscription Documents and Questionnaire for Ace Payday Plus II, LLC ("Subscription Documents"); (c) one and two page documents touting the check cashing industry and describing the returns that the investor would receive on his or her investment (i.e., "one sheets"); (d) a one sheet describing Ace Payday's supposed "interim manager" and his background in the check cashing industry; and (e) a cover letter from the telemarketer, a FedEx airbill, and wiring instructions to enable the investor to wire funds directly to Ace Payday. 13. Bianco created the offering materials. The Subscription Documents state that "[t]he Manager" - defined in the Operating Agreement and Business Plan as Ace Management and in Ace Payday's Florida state filings as Ace Management Inc. - "has carefully prepared the marketing brochure to disclose all known material facts relating to a subscription in the LLC." The Defendants send these offering materials to prospective investors that are solicited by the ISOs. 14. The offering materials claim that check cashing is possibly "the fastest growing industry in America today" and encourage investors to "[t]ake advantage of participating in this lucrative industry." The Operating Agreement and Business Plan project that the company's payday loan operations will yield "an average of up to 360% profit per year" and that the company's check cashing operations will generate "9-15% per week, [i.e.] up to 60% per month or up to 720% per year." 15. According to the Operating Agreement and Business Plan, Ace Payday's Members - i.e., the investors - will receive (a) "twenty percent (20%) per annum to be paid five percent (5%) quarterly" for three years, and (b) a pro-rata share in the company's profits. Ace Management, which retains 25 membership units in the LLC equal to a 20% ownership interest, will receive a management fee equal to 50% of gross profits. Defendants' Misrepresentations Regarding Use of Offering Proceeds 16. Defendants falsely represented that 90% of the offering proceeds would be used for working capital and other corporate purposes. Instead, between 40% and 45% of these proceeds were used to compensate the ISO's, acting as unregistered brokers soliciting investors for the offering. The Ace Payday Operating Agreement and Business Plan expressly represents that only 10% of the offering proceeds will go to commissions and that 90% of the proceeds of the offering will be used by the company. 17. Defendant Bianco, acting in his capacity as the executive officer and controlling individual of Ace Payday, Ace Management, and Ace Management Inc., prepared the offering materials or caused the offering materials to be prepared, and further, caused Ace Payday to enter into agreements with the ISO's to market the offering to investors. 18. The misrepresentations set forth above were and are material. The defendants either knew or were or are reckless in not knowing that those misrepresentations were false and misleading. Defendants' Misrepresented Projected Investment Returns 19. Defendants misrepresented prospective investor returns by claiming that investors will receive an annual return of 20% (5% quarterly) on their investment, plus a pro-rata portion of inflated profits from the so-called "payday loans" and the "payroll check cashing" operations. Ace Payday is not current in paying investors their quarterly returns, even though, on information and belief, it has opened two stores. This is so because Ace Payday has already missed its revenue projections in the first months of its business. 20. Defendants have also misrepresented that investors will share in projected 360% profits for the payday loan operations and 720% profits for the check cashing business. Defendants have no basis for asserting such inflated returns. Defendant Bianco, acting in his capacity as the executive officer and controlling individual of Ace Payday, Ace Management, and Ace Management Inc., prepared the offering materials or caused the offering materials to be prepared. Defendants knew or were reckless in not knowing that such returns are fraudulent, inflated, baseless, and unachievable. 21. The misrepresentations set forth above were and are material. The defendants either knew or were or are reckless in not knowing that those misrepresentations were false and misleading. FIRST CLAIM FOR RELIEF Violations of Sections 5(a) and (c) of the Securities Act 22. The Commission repeats and realleges the allegations set forth in paragraphs 1 through 21 as if fully set forth herein. 23. From at least August 2001 through to and continuing in the present, defendants, directly and indirectly, singly and in concert, have made use of the means or instruments of transportation or communication in, and the means or instruments of, interstate commerce, or by use of the mails, to offer and sell securities through the use or medium of a prospectus or otherwise when no registration statement has been filed or was in effect as to such securities and when no exemption from registration was available. 24. As part of and in furtherance of this fraudulent offering scheme, defendants offered unregistered securities to the public through telephone and mail solicitations. There were no registration exemptions available for the offering. 25. By reason of the foregoing, the defendants have violated, are about to violate, and unless restrained and enjoined will continue to violate Section 5(a) and (c) of the Securities Act, 15 U.S.C. §§ 77e(a) and 77e(c).
SECOND CLAIM FOR RELIEF Violations of Section 17(a) of the Securities Act,
26. The Commission repeats and realleges the allegations set forth in Paragraphs 1 and 25 as if fully set forth herein. 27. The defendants, directly and indirectly, singly and in concert, knowingly or recklessly, by the use of the means or instruments of transportation or communication in, and the means or instrumentalities of, interstate commerce, or by the use of the mails, in the offer or sale, and in connection with the purchase or sale, of securities: (a) employed devices, schemes or artifices to defraud; (b) obtained money or property by means of, or otherwise made untrue statements of material fact, or omitted to state material facts necessary to make the statements, in light of the circumstances under which they were made, not misleading; and (c) engaged in transactions, acts, practices and courses of business which operated or would operate as a fraud or deceit upon purchasers of securities or other persons. 28. As part of and in furtherance of this violative conduct, the defendants, directly or indirectly, made the representations and omitted to state the facts alleged in paragraphs 1 through 2, and 11 through 21, above. 29. The false statements and omissions made by defendants, more fully described in paragraphs 1 through 2, and 11 through 21, above, were material. 30. The defendants knew, or were reckless in not knowing, that the material misrepresentations, more fully described in paragraphs 1 through 2, and 11 through 21 above, were false or misleading. 31. By reason of the foregoing, the defendants have violated, are about to violate, and unless restrained and enjoined will continue to violate 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 promulgated thereunder, 17 C.F.R. § 240.10b-5. RELIEF REQUESTED WHEREFORE, Plaintiff Commission respectfully requests that this Court: A. Grant an Order temporarily and preliminarily, and a Final Judgment permanently enjoining defendants, their officers, agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from future violations of Sections 5(a) and (c), 15 U.S.C. §§ 77e(a) and 77e(c), and 17(a) of the Securities Act, 15 U.S.C. § 77q(a). B. Grant an Order temporarily and preliminarily, and a Final Judgment permanently enjoining defendants, their officers, agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from future violations of 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. C. Grant an Order directing defendants, and each of them, to file with this Court and serve upon plaintiff, within three business days, or within such extension of time as the Commission agrees, a verified written accounting, signed by them under penalty of perjury, of: 1. All assets, liabilities and property currently held directly or indirectly by or for the benefit of defendants, and each of them, including but not limited to bank accounts, brokerage accounts, investments, business interests, loans, lines of credit, and real and personal property wherever situated, describing each asset and liability, and its current location and amount; 2. All money, property, assets, and other income received by defendants, and each of them, or for their direct or indirect benefit, in or at any time from May 22, 2001 to the date of the accounting, describing the source, amount, disposition and current location of each of the items listed; 3. The names and last known addresses of all bailees, debtors, and other persons and entities which are currently holding the assets, funds or property of defendants, and each of them; and 4. All assets, funds, securities, real or personal property received by defendants, and each of them, or any other person controlled by them, from persons who provided money to defendants in connection with the offer, purchase or sale of investments of any kind, and the disposition of such assets, funds, investments, and real or personal property. D. Grant a Final Judgment directing defendants to disgorge their unjust enrichment from the fraudulent conduct alleged in this Complaint and to pay prejudgment interest thereon. E. Grant a Final Judgment assessing penalties against defendants 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), for the violations alleged herein. F. Grant an Order directing that defendants, and their officers, agents, servants, employees, attorneys-in-fact, and all persons in active concert or participation with each of them, who receive actual notice of such Order by personal service, facsimile service, or otherwise, and each of them, hold and retain within their control, and otherwise prevent any withdrawal, transfer, pledge, encumbrance, assignment, dissipation, concealment, or other disposal of any assets, funds, or other properties (including money, real or personal property, securities, chooses in action or property of any kind whatsoever) of defendants currently held by them or under their control, whether held in any of their names or for any of their direct or indirect beneficial interest wherever situated, and directing each of the financial or brokerage institutions, debtors, and bailees, or any other person or entity holding such assets, funds, or other properties of defendants, and each of them, to hold or retain within its control and prohibit the withdrawal, removal, transfer, or other disposal of any such assets, funds, or other properties. G. Grant an Order enjoining and restraining defendants or any person or entity acting at their direction or on their behalf from destroying, altering, concealing or otherwise interfering with the access of the plaintiff to any and all documents, books and records which are in the possession, custody or control of defendants, their agents, employees, servants, accountants, financial or brokerage institutions, and attorneys that refer, reflect or relate to the allegations of the Complaint, including, but not limited to, documents, books and records referring, reflecting or relating to Ace Payday's business operations, and its offer or sale of securities and the use of proceeds therefrom. H. Grant such other and further relief as is just and proper. Dated: New York, New York
SECURITIES AND EXCHANGE COMMISSION
By: _______________________________
John J. O'Donnell
Kenneth V. Byrne
Of Counsel: http://www.sec.gov/litigation/complaints/complr17422.htm
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