U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20746 / September 25, 2008
Securities and Exchange Commission v. Ricardo H. Goldman, Case No. 08-22666-CIV-LENARD/GARBER (S.D. Fla. filed Sept. 25, 2008)
On September 25, 2008, the Securities and Exchange Commission filed a civil injunctive action in federal District Court for the Southern District of Florida against Ricardo H. Goldman, a Miami, Florida resident, for fraudulently operating an unregistered securities day trading firm that primarily targeted investors in the Hispanic community. The Commission’s complaint alleges that Goldman violated the antifraud, broker-dealer registration, and securities registration provisions of the federal securities laws.
According to the Commission’s complaint, from approximately May 2004 through at least February 2006, Goldman solicited traders to invest approximately $2.1 million in a day trading operation he ran through his company, E Trade Fund LLC (“E Trade”). Goldman provided securities day trading capability to E-Trade Fund’s more than 110 traders and permitted them to day trade securities in E Trade Fund’s own brokerage account at a registered broker-dealer through sub-accounts created for each trader.
The Commission’s complaint alleges that Goldman misled traders into believing that their trading accounts were secured by the Securities Investor Protection Corporation (SIPC) and that they would be better protected against certain losses or risks by trading with E Trade Fund. He also omitted to disclose to traders that E Trade Fun994 even though E Trade Fund’s website touted his professional experience and reputation. The complaint alleges that E Trade Fund’s traders ultimately lost about $1.0 million out of the $2.1 million they originally invested.
The Commission’s complaint also alleges that at the same time Goldman ran the day-trading operation, he offered and sold other investments in E Trade Fund, which he characterized as certificates of deposit. The rates of return of these securities ranged from 5 to 10 percent annually on a 6-month certificate and 7 to 12 percent annually on a 12-month certificate. Goldman offered these investments to the public via an affiliated website.
According to the Commission’s complaint, Goldman misrepresented to investors that these certificates were insured and protected by the Federal Deposit Insurance Corporation (FDIC) and SIPC. He also falsely told investors that the returns on the certificates were “secured” and “guaranteed” when, in fact, the funds from the sales of these certificates were used solely to sustain E Trade Fund’s high risk day trading operation and the returns were based on its success. The complaint also alleges that Goldman violated the securities registration provisions in connection with the offer and sale of the certificates. Goldman raised about $317,000 from at least two investors through the sale of the certificates.
The Commission’s complaint alleges that Goldman violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The complaint seeks a permanent injunction, disgorgement plus prejudgment interest, and a civil penalty against Goldman.
Upon filing of the Commission’s complaint, and without admitting or denying the allegations in the complaint, Goldman consented to the entry of a Judgment that permanently enjoins him from violating the above-mentioned provisions of the federal securities laws. The partial settlement with Goldman leaves unresolved the issue disgorgement and a civil penalty.
E Trade Fund is not affiliated with E*TRADE FINANCIAL Corporation, the broker-dealer that is registered with the Commission.