U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20971 / March 25, 2009
SEC v. John M. Donnelly, et al., Civil Action No. 03:09CV0015 (W.D. Va., filed March 11, 2009)
Federal Court Issues Preliminary Injunction Order Against John Donnelly, Tower Analysis, Inc., Nasco Tang Corp., and Nadia Capital Corp.
The United States Securities and Exchange Commission announced that on March 23, 2009, the Honorable Judge Glen E. Conrad, a federal judge in the Western District of Virginia, entered a preliminary injunction order, by consent, against John M. Donnelly, Tower Analysis, Inc., Nasco Tang Corp., and Nadia Capital Corp.
The preliminary injunction restrains Donnelly and the other defendants from violating certain antifraud provisions of the federal securities laws. Also by consent, Judge Conrad ordered that the defendants' and relief defendants' assets remain frozen until further notice, except for a carve-out to provide one relief defendant with reasonable living expenses. The preliminary injunction order continues the relief originally obtained on March 11, 2009, in response to the Commission's emergency civil injunctive action that sought a temporary restraining order, an order freezing assets, disgorgement and civil penalties, and other relief against Donnelly and the other defendants based on their alleged violations of the federal securities laws.
The Commission's complaint alleges that from at least 1998, Donnelly fraudulently obtained at least $11 million from as many as 31 investors through the sale of securities in the form of limited partnership interests in three investment funds. The SEC alleges that Donnelly orchestrated the scheme through three entities, Tower Analysis Inc., Nasco Tang Corp., and Nadia Capital Corp. The complaint alleges that Donnelly told investors that he would pool their funds to invest in, among other things, stock and bond index derivatives. According to the complaint, despite representations to investors that he had generated annual returns of as much as 22%, Donnelly has done almost no securities trading. The complaint alleges that instead of using investor funds to execute trades, Donnelly used investor funds to repay other investors, and paid himself approximately $1 million in salary and fees during the last three years alone. The complaint also alleges that Donnelly has been soliciting investors for a new fund called Nadia Capital Partners, LP based on misrepresentations about his past trading results.
The preliminary injunction enjoins Donnelly and the other defendants from violating Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The defendants consented to the preliminary injunction and continued assets freeze, without admitting or denying the SEC's allegations.