U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21218 / September 22, 2009
Securities and Exchange Commission v. David L. Hersh, Civil Action No. 5:09-CV-417 (E.D.NC, September 22, 2009)
The Securities and Exchange Commission (Commission) announced today that on September 22, 2009, it filed a settled Complaint in the United States District Court for the Eastern District of North Carolina against David L. Hersh (Hersh). The Commission alleges that between January 2007 and January 2009, Hersh conducted a fraudulent offering of $2 million in unregistered securities from his home near Raleigh, North Carolina.
The Complaint alleges that Hersh raised more than $2 million from twelve investors to invest in an options trading program, and that he falsely and misleadingly told the investors that they could expect a 40% annual rate of return and that the program involved minimal risk. The Complaint further alleges that Hersh misappropriated approximately $575,000 in investor funds for his personal use and that he lost approximately $1,136,000 of the funds in risky options trading. According to the Complaint, as part of the scheme, Hersh deceived investors and prospective investors by showing them false trade confirmations and other documents which he created.
The Commission alleges that, by his conduct, Hersh violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder.
Hersh has entered into a consent in which he agrees to the entry of a final judgment providing for permanent injunctive relief, disgorgement of his ill-gotten gains of $574,936 plus prejudgment interest of $55,336, and a civil penalty of $130,000.