U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21532 / May 25, 2010
SEC v. Matthew J. Gagnon, Case No. 2:10-CV-11891 (E.D. Mich.)
On May 24, 2010, the Securities and Exchange Commission obtained an emergency court order freezing the assets of Matthew J. Gagnon ("Gagnon") for promoting and operating a series of fraudulent, unregistered securities offerings through his website, www.mazu.com. In its complaint filed in the U.S. District Court for the Eastern District of Michigan, the SEC alleges that from January 2006 through approximately August 2007, Gagnon helped orchestrate a massive Ponzi scheme conducted by Gregory N. McKnight ("McKnight") and his company, Legisi Holdings, LLC ("Legisi"), which raised a total of approximately $72.6 million from over 3,000 investors by promising returns of upwards of 15% a month. The complaint also alleges that Gagnon promoted Legisi but in doing so misled investors by claiming, among other things, that he had thoroughly researched McKnight and Legisi and had determined Legisi to be a legitimate and safe investment. The complaint alleges that Gagnon had no basis for the claims he made about McKnight and Legisi. Gagnon also failed to disclose to investors that he was to receive 50% of Legisi's purported "profits" under his agreement with McKnight. According to the complaint, Gagnon received a net of approximately $3.8 million in Legisi investor funds from McKnight for his participation in the scheme.
The SEC's complaint further alleges that beginning in August 2007, Gagnon fraudulently offered and sold securities representing interests in a new company that purportedly was to develop resort properties. The complaint alleges that Gagnon, among other things, falsely claimed that the investment was risk-free and "SEC compliant," and guaranteed a 200% return in 14 months. In reality, however, Gagnon sent the money to a twice-convicted felon, did not register the investment with the SEC, and knew such an outlandish return was impossible. Gagnon took in at least $361,865 from 21 investors. The SEC's complaint alleges that in April 2009, Gagnon began promoting a fraudulent offering of interests in a purported Forex trading venture. Gagnon guaranteed that the venture would generate returns of 2% a month or 30% a year for his investors. Gagnon's claims were false, and Gagnon had no basis for making the claims. Finally, the complaint alleges that from October 2009 to November 2009, Gagnon offered another purported Forex trading venture in which he claimed to have a trader in Europe who would trade foreign currencies for investors in exchange for 40% of any profits he generated. Gagnon removed this offer from his website in November 2009 when he received notice that the SEC had subpoenaed his bank records.
The SEC's complaint charges Gagnon with violating Sections 5(a), 5(c), 17(a) and 17(b) of the Securities Act of 1933 and Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to the emergency relief already obtained, the complaint seeks preliminary and permanent injunctions, disgorgement, and civil penalties from Gagnon.
The Honorable George Caram Steeh of the U.S. District Court for the Eastern District of Michigan issued an Order freezing all of Gagnon's assets and scheduling an evidentiary hearing for June 23, 2010, on the Commission's motion for a preliminary injunction.
See Also: SEC Complaint