U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21062 / May 29, 2009
SEC CHARGES HAWAII RESIDENT WITH RUNNING PONZI SCHEME
SECURITIES AND EXCHANGE COMMISSION v. DAVID E. RUSKJER, Civil Action No. CV 09-00237 SOM (KSC) (D. Haw.)
On May 27, 2009, the Securities and Exchange Commission filed a complaint in the U.S. District Court in Honolulu, Hawaii, charging David E. Ruskjer ("Ruskjer") with fraudulently raising $16 million from at least 140 investors in a Ponzi scheme. The SEC's complaint alleges that between September 2004 and December 2008, Ruskjer engaged in an unregistered offering of promissory notes to investors that were to pay fixed monthly returns of 3 percent to 5 percent from Ruskjer's purportedly profitable trading in call options. According to the SEC's complaint, Ruskjer, a self-employed computer consultant who lives in Koloa, Hawaii, used only half of the investors' monies to trade securities, which incurred an average monthly loss over the four years of his scheme, and used remaining monies to pay fictitious trading profits to investors and his personal expenses.
The SEC's complaint alleges that Ruskjer induced investors to purchase his promissory notes by misrepresenting his unsuccessful options trading and his use of their funds. The SEC asserts that Ruskjer claimed to have a safe and non-speculative options trading strategy that made a monthly net profit of 5 percent to 5.5 percent, from which he promised to pay investors, depending on the time period and investor, a 3 percent to 5 percent monthly return. According to the SEC's complaint, Ruskjer's securities trading from 2004 to 2008 sustained an average monthly loss of 5.8 percent and a net loss of $2.6 million. Moreover, as alleged in the complaint, Ruskjer used only $7.9 million of the $16 million entrusted to him by investors to trade securities, $5.5 million to pay fictitious securities trading profits to investors, and most of the remaining funds for personal expenses, such as $523,466 to buy a condominium, $112,000 on cash withdrawals, and $743,000 on debit card purchases.
The SEC's complaint charges Ruskjer with violations of the antifraud provisions of 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 securities registration provisions of Section 5(a) and 5(c) of the Securities Act, and the broker-dealer registration provisions of Section 15(a) of the Exchange Act. The complaint seeks a permanent injunction, disgorgement of ill-gotten gains, and a financial penalty against Ruskjer.