Litigation Release No. 22331 / April 13, 2012
Securities and Exchange Commission v. Shervin Neman and Neman Financial, Inc. , et al. Case No. No. CV-12-03142 JHN (PLA)] (C.D. Cal. April 11, 2012)
SEC SHUTS DOWN PONZI SCHEME TARGETING PERSIAN-JEWISH COMMUNITY IN LOS ANGELES
The Securities and Exchange Commission today obtained an emergency court order to halt an alleged ongoing $7.54 million Ponzi scheme that targeted members of the Persian-Jewish community in Los Angeles.
The Commission alleges that for the past two years, Shervin Neman raised money from investors by claiming to be a hedge fund manager. Neman told investors that his purported hedge fund, Neman Financial L.P., invested in foreclosed residential properties that would be quickly flipped for profit, in Facebook shares obtained in private transactions, and highly anticipated initial public offerings, including Groupon, Inc., and LinkedIn Corp., and Angie’s List, Inc. Although Neman promised investors exorbitant returns resulting from his investing acumen and access to pre-IPO shares of well-known companies, what they actually received was simply other investors’ monies, the hallmark of a Ponzi scheme.
The Honorable Jacqueline H. Nguyen for the U.S. District Court for the Central District of California granted the Commission’s request for a temporary restraining order and asset freeze against Neman and the entities he controlled.
According to the Commission’s complaint, Neman raised funds from at least 11 investors in the fraudulent securities offering. Most of these investors were members of the Los Angeles Persian-Jewish community, of which Neman is also a member.
The Commission alleges that more than 99% of the money Neman raised was used either to pay returns to existing investors, or to fund his lavish lifestyle. According to the Commission, Neman spent nearly $1.6 million of investor funds to buy jewelry, pay for his wedding and honeymoon, as well as high-end cars, VIP tickets to sporting events, and vacations.
The Commission’s complaint alleges that Neman and Neman Financial, Inc. violated Section 17(a)(1-3) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a-c) thereunder, and Sections 206(1), (2), and (4) of the Investment Advisers Act of 1940, and Rule 206(4)-8(a)(1) thereunder, and Neman Financial violated, and Neman aided and abetted violations of, Section 203A and 204(a) of the Advisers Act, and Rule 204-2 thereunder; and seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest thereon, and financial penalties, against each of them. The Commission’s complaint also names Cassandra C. Neman, Neman’s wife, as a relief defendant, seeking disgorgement of her ill-gotten gains.
Judge Nguyen has scheduled a court hearing for April 23 at 2 p.m. on the Commission’s motion for a preliminary injunction.