U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23199 / February 18, 2015
Securities and Exchange Commission v. K2 Unlimited, Inc., Civil Action No. 1:11-cv-11649
SEC Obtains Final Judgments Against Massachusetts Company and Its President for Bogus "Bank Guarantee" Investment Scams
The Securities and Exchange Commission announced today that on February 13, 2015, the Honorable Mark L. Wolf of the United States District Court for the District of Massachusetts entered a final judgment by consent against defendant Diane Glatfelter, of Billerica, Massachusetts, and against the company she controlled, K2 Unlimited, Inc., in a securities fraud case filed by the Commission in 2011. Glatfelter and K2 consented to the entry of a final judgment without admitting or denying the allegations against them. The final judgment imposes on both Glatfelter and K2 a permanent injunction against future violations of antifraud and other provisions of the federal securities laws, and imposes on Glatfelter a bar from serving as an officer or director of a publicly-traded company. Glatfelter was also held liable for disgorgement in the amount of $340,369.77, which the final judgment deemed was satisfied by an order of restitution entered against her in December 2014 following her criminal conviction of wire fraud for unrelated conduct.
In its Complaint, filed September 19, 2011, the Commission alleged that beginning in 2007, Glatfelter, through her companies K2 and 211 Ventures, LLC, and with a co-defendant, Robert Rice, offered investments in fraudulent trading programs that purportedly involved "bank guarantees" and promised sky-high returns with guarantees against loss. In fact, the Commission alleges that the bank guarantees were fictional and the trading programs non-existent. According to the Commission, Glatfelter, through K2 and 211 and with Rice, defrauded investors of more than $1.8 million through that fraudulent scheme. According to the Commission's complaint, in early 2009, Glatfelter became associated with another defendant also charged in the federal complaint, Robert Anderson, and began with him to offer fraudulent investments, also based in part on fictitious financial instruments, causing additional investor losses of at least $425,000. The Commission also alleged that Glatfelter falsely assured investors that she was not a "scam artist," by pointing to her position with a separate, publicly-traded company.
The final judgment permanently enjoins Glatfelter and K2 from violating Section 17(a) of the Securities Act of 1933; Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; Sections 5(a) and 5(c) of the Securities Act; and Section 15(a) of the Exchange Act. The final judgment also permanently bars Glatfelter from serving as an officer or director of a public company. The final judgment found that Glatfelter was liable for disgorgement to investors in the amount of $340,369.77, representing her personal ill-gotten gains. The judgment deemed that Glatfelter's disgorgement is satisfied by the order of restitution entered on December 18, 2014 in the criminal case, United States v. Diane Glatfelter, Criminal No. 12-cr-10247-MLW (D. Mass.). In that case, a Massachusetts federal court entered a judgment against Glatfelter following her conviction of 4 counts of wire fraud, and sentenced Glatfelter to 30 months of imprisonment and to pay $1.575 million in restitution.
The judgments against Glatfelter and K2 conclude the SEC's litigation in this matter. On March 13, 2013, the court entered final judgments by default against defendants 211 Ventures, LLC, and Robert S. Anderson, imposing judgments totaling more than $2.3 million in disgorgement, prejudgment interest and civil penalties, and permanently enjoining both defendants from future violations of the antifraud and other provisions of the federal securities laws. On April 4, 2014, the court entered a final judgment by consent against defendant Robert C. Rice, of Tallahassee, Florida, imposing a permanent injunction against future violations of antifraud and other provisions of the federal securities laws and ordering Rice to pay disgorgement, prejudgment interest and a civil penalty totaling $525,896.51.
The Commission's Complaint alleges that the defendants in this matter purported to offer investments using so-called "bank guarantees," among other fictional instruments. Investors who are offered investments similar to those alleged in the Commission's complaint may want to consult the following information available on the SEC's website:
"Prime Bank Investments" (http://investor.gov/investing-basics/avoiding-fraud/types-fraud/prime-bank-investments)
"Warning to All Investors About Bogus "Prime Bank" and Other Banking-Related Investment Schemes" (http://www.sec.gov/divisions/enforce/primebank.shtml)
"How Prime Bank Frauds Work" (http://www.sec.gov/divisions/enforce/primebank/howtheywork.shtml)