U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21448 / March 11, 2010
Securities and Exchange Commission v. Darryl Lamonth Clark, Case No. Case No. C09-03423 RS United States District Court for the Northern District of California (July 27, 2009).
Permanent Injunction, Order of Disgorgement and Penalty Entered Against California Sales Agent in Connection With $45 Million Ponzi-Like
The Securities and Exchange Commission announced that on March 8, 2009, the Honorable Richard Seeborg, United States District Judge for the Northern District of California, entered a final judgment by default against defendant Darryl Lamonth Clark ("Clark") for his participation in a fraudulent ponzi-like scheme perpetrated by Terchi "Nelson" Liao and two entities Liao controlled, AOB Commerce, Inc. and AOB Asia Fund I, LLC (collectively, "AOB"). Judge Seeborg issued an order enjoining Clark from future violations of the anti-fraud, as well as broker-dealer and securities registration provisions of federal securities laws. Judge Seeborg further ordered Clark to disgorge $779,849.09, plus prejudgment interest of $107,858.14, and assessed a $130,000 civil penalty against Clark.
The SEC's complaint, filed July 27, 2009, alleged that AOB and several related entities raised more than $45 million from hundreds of investors in several states from mid-2004 to July 2007, through the unregistered offering and sale of promissory notes that in many cases paid interest of up to 5.5% per month. The complaint alleged that, although AOB purported to be in the business of making loans to companies in Asia, investor proceeds were used primarily to pay principal and interest on the notes, pay commissions to sales agents, and make undisclosed loans to entities affiliated with AOB. The SEC brought the scheme to a halt in July 2007, with the filing of an emergency action and the appointment of a receiver. [SEC v. AOB Commerce, Inc., et al., Civil Action No. CV-07-4507 CAS (JCx) (C.D. Cal. filed July 12, 2007)].
The SEC's complaint alleged that Clark became an AOB sales agent in July 2004, and that he managed AOB's San Jose, California branch office. The complaint further alleged that Clark failed to conduct adequate due diligence, helped create a misleading brochure given to investors, and failed to register or become associated with a registered broker-dealer at the time that he participated in the sale of notes. As a result of his activities, the complaint alleged that Clark violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.
For more information, see Litigation Release Nos. 21153 (July 27, 2009), 20241 (August 14, 2007), and 20196 (July 16, 2007).