U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23568 / June 14, 2016
Securities and Exchange Commission v. Andrew K. Proctor, et al., Civil Action No. 16-cv-00437 (D. Del. Filed June 14, 2016)
SEC Announces Charges in $22 Million Offering Fraud
The Securities and Exchange Commission today announced that Andrew K. Proctor and Atlas JG, LLC, a company formed by Proctor, have agreed to pay nearly $17.9 million to settle fraud charges.
The SEC's complaint, filed in federal district court in Wilmington, Delaware, alleges that, from 2007 through 2011, Proctor, of Perris, California, through Atlas, raised more than $22 million from at least 200 overseas investors through a fraudulent offering of purported bonds promising annual returns of eight to nine percent. Proctor told prospective investors that their funds would be used to purchase receivables from homebuilding subcontractors at a discount, and that Atlas would profit from the difference between the discounted price and the amount ultimately collected from homebuilders. However, Atlas used less than ten percent of the funds raised to buy receivables from homebuilding subcontractors as promised, the last purchase occurring in 2008, and continued to fraudulently raise funds from investors for several years thereafter.
The SEC's complaint further alleges that, contrary to what investors were told, Proctor used at least $11 million of investor funds to make so-called "interest" and "principal" payments to investors. He used the balance of the proceeds raised to, among other things, fund offshore investments in Asia, speculate in stock options and other derivatives, and finance his lifestyle. Proctor took almost $3 million of investor funds to pay personal expenses, including his mortgage, his credit card bills, and his children's tuition.
Proctor had previously pled guilty to conspiracy to commit wire and securities fraud in connection with a penny stock pump-and-dump scheme and been barred by the SEC from participating in the penny stock market.
Without admitting or denying the SEC's allegations, Proctor and Atlas agreed to settle the case against them. The settlement is subject to court approval. Specifically, the defendants consented to the entry of final judgments permanently enjoining them from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; requiring Proctor and Atlas to pay, jointly and severally, disgorgement of $11,115,954, the amount of their ill-gotten gains, plus prejudgment interest of $1,473,249; and ordering Proctor to pay a civil penalty of $910,000 and Atlas to pay a civil penalty of $4,400,000.
The SEC's investigation was conducted by Kelly L. Gibson, Assunta Vivolo, Polly A. Hayes, and Brian R. Higgins in the Philadelphia Regional Office, with assistance from trial counsel David L. Axelrod and Julia C. Green. The matter was supervised by G. Jeffrey Boujoukos. The investigation followed an examination conducted by Philadelphia office examination staff David A. Spencer and Elizabeth Peltz-Rubino, under the supervision of Frank A. Thomas and Diane J. Hagy.