U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23396 / October 29, 2015
Securities and Exchange Commission v. Diverse Financial Corp., et al., Civil Action No. 8:15-cv-01746 (C.D. Cal., filed October 28, 2015)
SEC Charges Orange County Firm and Its Principals with Defrauding Investors
The Securities and Exchange Commission yesterday filed fraud charges against an Orange County, California company, its CEO, and its former President.
The SEC's complaint, filed in federal court, alleges that defendants Diverse Financial Corporation, its CEO Roy Dekel, and its former President David Kandell raised approximately $3.29 million from at least 16 investors through their fraudulent offer and sale of promissory notes issued by DF Capital Partners, LLC, a bankrupt subsidiary of Diverse Financial. The defendants allegedly made false and misleading statements to investors regarding the use of investor proceeds. For example, the complaint alleges that the defendants told investors that their funds would be used exclusively to invest in premium finance lending (where loans are made to borrowers to pay premiums on their life insurance policies) or "short-term cash type investments," pending such investments. In fact, according to the complaint, Diverse Financial and Dekel diverted investor funds to pay for Diverse Financial's operations.
In addition, the complaint alleges that Diverse Financial and Dekel engaged in a scheme to defraud investors by misappropriating all DF Capital investor funds to pay for Diverse Financial's operations and making Ponzi-like payments to investors. Kandell also allegedly knew, or should have known, that Diverse Financial and Dekel did not use investor funds as represented, and therefore had no reasonable basis to tell investors that they were being used as disclosed in the offering materials.
The Commission alleges that Diverse Financial and Dekel violated the antifraud provisions of the securities laws in Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933 ("Securities Act"). The complaint also alleges that Dekel and Diverse Financial violated Section 20(a) of the Exchange Act as control persons of DF Capital Partners, LLC. Finally, the complaint alleges that Kandell violated the antifraud provisions in Section 17(a)(2) of the Securities Act. The SEC's complaint seeks permanent injunctions, civil penalties, disgorgement plus prejudgment interest, and other relief against all of the defendants.
Matthew Montgomery, Dora Zaldivar, and Robert Conrrad conducted the SEC's investigation. The litigation will be led by Amy Longo.