UNITED STATES DISTRICT COURT
COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF
Plaintiff Securities and Exchange Commission ("Commission") alleges:
1. The Commission brings this action to restrain and enjoin the Defendants from continuing to violate the federal securities laws in connection with their ongoing, fraudulent, unregistered offer and sale of securities in the form of investment contracts or other evidence of indebtedness. From at least March 2002 to the present, Gold-Ventures Club ("Gold-Ventures") and Alexander Khamidouline ("Khamidouline") (collectively the "Defendants") have duped investors by offering and selling unregistered securities in Gold-Ventures, a purported offshore Internet investment vehicle, and have impersonated a Commission staff member. The Defendants continue to deceptively obtain investor funds over the Internet by making numerous false representations including that Gold-Ventures offers risk-free investments with a guaranteed return of 200% in 14 days. Unless immediately restrained and enjoined, the Defendants will continue to defraud the investing public and place investor funds at serious risk of diversion and theft.
2. Gold-Ventures Club is an entity that operates an Internet investment website (the "Website"). The Website provides an e-mail address to contact Gold-Ventures, but no address or telephone number. The Commission has been unable to locate an address for Gold-Ventures. Internet website hosting service EarthLink and its server, which host Gold-Ventures' Website, are located in Atlanta, Georgia.
3. Alexander Khamidouline is at least one of the people responsible for, and/or controlling, the investment program offered by Gold-Ventures and operating the Gold-Ventures Website. The Commission believes Khamidouline resides in Irkutsk, Russia.
JURISDICTION AND VENUE
4. This Court has subject matter jurisdiction over this action pursuant to Sections 20(b), 20(d) and 22(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. §§ 77t(b), 77t(d) and 77v(a); and Sections 21(d), 21(e), and 27 of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. §§ 78u(d), 78u(e) and 78aa.
5. This Court has personal jurisdiction over the Defendants by virtue of the Defendants' activities directed at the United States and the Northern District of Georgia. The Defendants contracted with an Atlanta-based server to host their Website, consented to personal jurisdiction in Georgia in that contract, sent e-mails to United States residents advertising the fraudulent securities, accepted money from United States residents to invest in the fraudulent investment program, contracted with a domain name registrar in the United States to register the name of the Website, and impersonated a Commission attorney located in the United States.
6. Venue is proper in the Northern District of Georgia as the Defendants consented to venue here in their contract with the Atlanta-based server, and because the server that hosts the Website (i.e., the medium from which the Defendants make their Website available to the public) is located in Atlanta.
7. The Defendants, directly and indirectly, have made use of the means and instrumentalities of interstate commerce, the means and instruments of transportation and communication in interstate commerce, and the mails, in connection with the acts, practices, and courses of business of which the Commission complains.
THE FRAUDULENT SCHEME
8. Since at least March 2002, the Defendants have offered an investment program through the Gold-Ventures Website, located on the Internet at (www.gold-ventures.net). The Defendants' short-term investment program promises an exorbitant 200% return on principal investments of $250.00 to $5000.00 in only 14 days. The Defendants claim to remit a 200% return on the principal invested in a single payment at the end of each 14-day investment term.
9. The Defendants represent on the Gold-Ventures Website that the investments in, and returns from, the investment program are guaranteed, risk-free, and require no investor participation. For example, the "About" section of the Website states that "our group gives guarantees that in 14 days we will DOUBLE every amount you deposit (From 250 to 5000 $USD) with no risk for you! We do it when you sleep, walk, go to work or make shopping. We need no effort on your part to work with your investments and pay you high returns."
10. In the same section of the Website, the Defendants also claim "there are already 900 members (as of 01 April 2002) in our private club who get full satisfaction" from their investments, and that 2002 "will be [its] most profitable" year.
11. The Defendants also represent on the Website that Gold-Ventures has a referral program whereby anyone who introduces a new member to the Website will receive 15% of the initial investment of the new participant.
12. On the Website, the Defendants further represent that Gold-Ventures' organizers can generate 200% profits for investors every 14 days due to their knowledge of, and "by working with[,] the real world financial markets." The Website also maintains that Gold-Ventures is "based on a real business model," maintains "a large fund of reserve capital" in the event of any "unforeseen situation[s]," and makes "payouts" to investors through a "pool" of funds.
13. In addition, the Defendants instruct investors on the Website to send funds and make payments to Gold-Ventures through Internet payment services EvoCash and E-gold. The Website, however, does not explain to investors how the Defendants make payments from Gold-Ventures to investors.
14. Through this investment program, Gold-Ventures and Khamidouline have raised money from at least four investors, two of whom are in the United States.
15. Since at least March 2002, the Defendants have solicited these investors (and based on the representations on the Website, others) through mass electronic mailing campaigns, known as "spam" emails. Like the Website, the spam e-mails contain a detailed description of the Gold-Ventures' investment program, and make the same material misrepresentations and omissions regarding the safety of and return on investments in Gold-Ventures. The e-mails provide detailed instructions on how to contact Gold-Ventures by e-mail and invest in the program.
16. At no time did the Defendants place limitations on the number or residence of Gold-Ventures investors, limit their Internet solicitations to only ascertained accredited investors, or provide any mechanism on the Website or elsewhere to exclude potential investors that were not pre-qualified accredited investors.
17. The representations described in Paragraphs 1 and 8 through 15 were materially false and misleading as the investment in, and return on investments from, the Gold-Ventures Club investment program are not and cannot be risk-free or guaranteed. Among other things, investing in global financial markets by its nature involves undertaking risk. Thus, Gold-Ventures could not guarantee exorbitant risk-free returns on investments made during all 14-day business cycles throughout the year.
18. In addition, it is economically not feasible for an issuer of fixed-income instruments to provide exorbitant short-term, risk-free financial returns in an open-ended offering. The investment terms the Defendants offer - short-term, fixed financial returns that are both exorbitant and risk-free - are patently fraudulent and are typical of Ponzi and Prime Bank schemes.
19. Therefore, the Defendants knew or were reckless in not knowing that the representations set forth in Paragraphs 1 and 8 through 15 were false.
20. On May 2, 2002, a Commission attorney sent by e-mail a letter addressed to Khamidouline, informing him that the Commission was conducting an informal inquiry into Gold-Ventures' operations. The letter requested numerous documents of Gold-Ventures to aid in the inquiry.
21. Not only did Gold-Ventures and Khamidouline ignore the request, but they apparently used the letter in an attempt to blackmail a former investor into giving them more money. On May 6, 2002, just four days after the Commission sent its letter, the former investor received an e-mail purportedly from a Commission attorney with an almost identical name to the attorney who sent the letter to the Defendants. The fake letter stated that the Commission was investigating the investor, but would end its investigation if the investor sent money to Gold-Ventures' EvoCash account. The e-mail contains the Commission's actual file number of the Gold-Ventures investigation.
FIRST CLAIM FOR RELIEF
Violations of Sections 5(a) and 5(c) of the Securities Act
22. The Commission repeats and realleges the allegations of Paragraphs 1 through 21 by reference.
23. Each investment in Gold-Ventures Club was an investment contract or other evidence of indebtedness constituting a security.
24. No registration statement was filed or in effect with the Commission pursuant to the Securities Act, and no exemption from registration exists with respect to the securities and transactions described above.
25. From at least March 2002 through the present, Defendants Gold-Ventures and Khamidouline, directly and indirectly, have been: (a) making use of the means or instruments of transportation or communication in interstate commerce or of the mails to sell securities through the use or medium of a prospectus or otherwise; (b) carrying securities or causing such securities to be carried through the mails or in interstate commerce, by any means or instruments of transportation, for the purpose of sale or delivery after sale; and/or (c) making use of the means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise without a registration statement having been filed or being in effect with the Commission as to such securities.
26. By reason of the foregoing, Gold-Ventures and Khamidouline, directly and indirectly, have violated, and unless enjoined, will continue to violate Sections 5(a) and 5(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, 15 U.S.C. § 77q(a);
27. The Commission repeats and realleges the allegations of Paragraphs 1 through 21 by reference.
28. Each investment in Gold-Ventures Club was an investment contract or other evidence of indebtedness constituting a security.
29. From at least March 2002 through the present, Defendants Gold-Ventures and Khamidouline, 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/or (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.
29. As part of and in furtherance of this conduct, the Defendants, directly or indirectly, made the representations and omitted to state the facts alleged in Paragraphs 1 and 8 through 15.
30. The false statements and omissions made by Defendants, described in Paragraphs 1 and 8 through 15, were material to investors' decisions to invest in Gold-Ventures' securities.
31. The Defendants knew, or were reckless in not knowing, that the material misrepresentations described in Paragraphs 1 and 8 through 15 were false or misleading.
32. By reason of the acts, omissions, practices, and courses of business set forth in this Complaint, the Defendants have violated and, unless retrained and enjoined, will continue to violate, 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 under Section 10(b), 17 C.F.R. § 240.10b-5.
WHEREFORE, the Commission respectfully requests that the Court:
Declare, determine and find that Defendants Gold-Ventures and Khamidouline committed the violations of the federal securities laws alleged in this Complaint.
Temporary Restraining Order, Preliminary and Permanent Injunctive Relief
Issue a Temporary Restraining Order, a Preliminary Injunction and a Permanent Injunction, restraining and enjoining Defendants Gold-Ventures and Khamidouline, and their officers, agents, servants, employees, attorneys, and all persons in active concert or participation with them, and each of them, from violating: (i) Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 77e(a) and 77e(c); (ii) Section 17(a)(1) of the Securities Act, 15 U.S.C. § 77q(a); (iii) Sections 17(a)(2) and 17(a)(3) of the Securities Act, 15 U.S.C. §§ 77(q)(a)(2) and (a)(3); and (iv) Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5.
Asset Freeze and Accounting
Issue an Order temporarily freezing the assets of Defendants Gold-Ventures and Khamidouline until further Order of the Court, and requiring accountings by Gold-Ventures and Khamidouline.
Issue an Order requiring Defendants Gold-Ventures and Khamidouline to disgorge all ill-gotten profits or proceeds that they have received as a result of the acts and conduct complained of, with prejudgment interest.
Repatriation of Investor Proceeds
Issue an Order requiring Defendants Gold-Ventures and Khamidouline to take necessary steps to repatriate to the territory of the United States all funds and assets of investors described in the Commission's Complaint in this action which they hold or are under their direct or indirect control, jointly or singly, and deposit such funds into the registry of the United States District Court for the Northern District of Georgia, and provide the Commission and the Court a written description of the funds and assets so repatriated.
Issue an Order directing Khamidouline to pay civil money penalties pursuant to Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d); and Section 21(d) of the Exchange Act, 15 U.S.C. § 78(d)(3).
Records Preservation and Expedited Discovery
Issue an Order requiring Defendants Gold-Ventures and Khamidouline to preserve any records related to the subject matter of this lawsuit that are in their custody, possession or subject to their control, and to respond to discovery on an expedited basis.
Grant such other and further relief as may be necessary and appropriate.
Retention of Jurisdiction
Further, the Commission respectfully requests that the Court retain jurisdiction over this action in order to implement and carry out the terms of all orders and decrees that the Court may enter, or to entertain any suitable application or motion by the Commission for additional relief within the jurisdiction of this Court.
May ____, 2002
Donna K. Knapton
Attorneys for Plaintiff
Local Counsel for Plaintiff