U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20422 / January 3, 2008
Securities and Exchange Commission v. Coadum Advisors, Inc.; Mansell Capital Partners III, LLC; James A. Jeffery; Thomas E. Repke; Coadum Capital Fund 1, LLC; Coadum Capital Fund II, LP; Coadum Capital Fund III, LP; and Mansell Acquisition Company LP, Civil Action File No. 1:08-CV-0011-ODE (N.D. Ga.).
The Securities and Exchange Commission announced that on January 3, 2008 it filed a complaint, and motion seeking a temporary restraining order, asset freeze and appointment of a Receiver in the United States District Court for the Northern District of Georgia. The complaint seeks relief against two individuals and six entities under their control. The complaint alleges that defendants Coadum Advisors, Inc. ("Coadum"), Mansell Capital Partners III, LLC ("Mansell"), James A. Jeffery ("Jeffery"), Thomas E. Repke ("Repke"), Coadum Capital Fund 1, LLC ("Coadum 1"), Coadum Capital Fund II, LP ("Coadum II"), Coadum Capital Fund III, LP ("Coadum III") and Mansell Acquisition Company LP ("MAC") engaged in fraud in conjunction with a series of four securities offerings which began in early 2006. Two of the offerings are ongoing, and approximately $30 million has been raised from approximately 150 investors. The complaint also alleges that Jeffery of Ontario, Canada and Repke of Holladay, Utah, control the entities and are directing the offerings.
The Complaint alleges that the defendants falsely represent to investors that they will receive a return of from 3 to 6% per month, misrepresent that their principal is protected and never leaves the escrow account; and fail to disclose that the defendants have made loans to themselves from the investor proceeds. However, in reality, the defendants have transferred the majority of the funds to Exodus Equities, Inc. ("Exodus") a Malta based "investment platform" which in turn appears to have placed the funds in the Exodus Platinum Genesis Fund, Ltd. ("Exodus Platinum Fund"), a Bermuda hedge fund which has yet to begin operation, and in "Pre-REIT convertible bonds" which have yet to provide any return. Furthermore, the complaint alleges that the defendants have falsely represented in monthly account statements to investors that they have earned approximately 4% per month, and that all or most of their principal is in escrow. Finally, the complaint alleges that, without disclosure to investors, Coadum and Mansell have also "borrowed" in excess of $3 million of, or against, the investors' funds and have disbursed approximately $5 million to related parties.
The Complaint alleges that all defendants violated Section 17(a) of the Securities Act of 1933 (Securities Act), and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and that defendants Coadum, Mansell, Jeffery and Repke further violated, Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 ("Advisers Act") [15 U.S.C. 15 U.S.C. §§ 80b-6 (1) and (2)].
The Commission also announces that the Honorable Orinda D. Evans, United States District Judge for the Northern District of Georgia, entered an order on January 3, 2008 (1) temporarily restraining the eight defendants from violations of the antifraud provisions of the Securities Act and the Exchange Act, and further restraining Coadum, Mansell, Jeffery and Repke from violations of the Adviser's Act; (2) requiring the defendants to show cause why a preliminary injunction should not be granted; (3) requiring an accounting of all funds received by the defendants pursuant to the scheme described in the Complaint; (4) freezing the assets of the eight defendants; (5) expediting discovery and prohibiting destruction of documents; and (6) appointing a Receiver for the six entity defendants.