U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20075 / April 11, 2007
SEC v. Novus Technologies, LLC, a Utah limited liability company, Ralph W. Thompson, Jr., Duane C. Johnson, RCH2, LLC, a Utah limited liability company, Robert Casey Hall and Eric J. Wheeler, defendants, and U.S. Ventures, LC, a Utah limited liability company, U.S. Ventures International, LLC, a Utah limited liability company, Robert L. Holloway, Online Strategies Group, Inc., a Delaware corporation, and David Story, relief defendants, Civil No. 2:07 CV 00235 PGC (USDC Utah, filed April 11, 2007).
The Commission has obtained an order temporarily restraining Novus Technologies, LLC, Ralph W. Thompson, Jr., Duane C. Johnson, RCH2, LLC, and Robert Casey Hall, from making unregistered fraudulent offers, sales and purchases of securities. The Court also temporarily restrained Hall, Thompson and Johnson from acting as unregistered brokers. The Court froze the assets of Novus, RCH2, Hall, Thompson, Johnson, U.S. Ventures, LC (US Ventures), U.S. Ventures International, LLC, (USVI), Robert L. Holloway, Online Strategies Group, Inc., and David Story The Order was entered April 11, 2007, by the Honorable Paul G. Cassell, United States District Judge for the District of Utah.
The complaint alleges the defendants have obtained investments of at least $4.8 million from the fraudulent unregistered sale of short-term promissory notes and joint venture agreements from at least 50 investors. It is alleged that Novus and RCH2 have made offers and sales through: the Internet, referrals from current investors and sales presentations at a Salt Lake City shopping mall. Both Novus and RCH2 allegedly have sold six month promissory notes providing for returns to investors of between 3% and 5% per month.
The complaint further alleges that Novus and RCH2 have been telling investors this opportunity is "too good NOT to be true." Novus and RCH2 allegedly claim they invest client funds in hard money lending, real estate, S&P 500 options, foreign currency futures and stocks. Novus and RCH2 also allegedly represent to investors that 80% of investor funds are placed in low risk investments such as real estate with only 20% of the funds invested in high risk investments such as currency futures. Investors are also allegedly told the funds are 100% safe because they are pooled in a large interest-bearing account. It is further alleged that Novus and RCH2 have told investors their funds are backed by liquid assets or real estate and sufficient funds are maintained to cover six months worth of interest and principal.
The complaint alleges that these representations are false and that, in fact, almost all investor money has been invested in high risk currency futures or S&P 500 futures through US Ventures resulting in trading losses of at least $9 million. It is also alleged that other funds received from investors have been used by the defendants and relief defendants to purchase a home, pay credit card bills, purchase expensive jewelry and to purchase a home spa without disclosing these facts to investors. It is also alleged in the complaint that funds obtained from later investors in the scheme were used to pay promised returns to earlier investors in a classic Ponzi scheme.
The Complaint further alleges that Novus and RCH2 told investors that there was a minimum investment of $50,000 or $100,000. Investors who did not have the necessary funds were allegedly directed to Eric Wheeler, a former employee of the Salt Lake City office of a bank, who assisted the prospective investors in obtaining small business lines of credit from the bank using inflated income or net revenue figures for business entities created for the sole purpose of investing with Novus or RCH2. It is alleged that once the lines of credit were established, Wheeler transferred the entire loan proceeds to Novus or RCH2, which then transferred the funds to US Ventures where the funds were invested in foreign currency futures.
The Complaint charged Novus, RCH2, Hall, Thompson and Johnson with violating the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933 and the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint charges Hall, Thompson and Johnson with violating the broker-dealer registration provision of Section 15(a) of the Exchange Act and Wheeler with aiding and abetting violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. A hearing has been scheduled for April 20, 2007.
The Commission acknowledges the assistance of the United States Attorney's Office for the District of Utah, the Federal Bureau of Investigation, the Bureau of Land Management and the State of Utah Division of Securities in this matter.