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U.S. Securities and Exchange Commission


Litigation Release No. 23642 / September 12, 2016

Securities and Exchange Commission v. Charles A. Banks, IV, No. 16-cv-3399 (N.D. Ga. filed Sept. 9, 2016)

Investment Adviser Charged With Defrauding Former Pro Basketball Player

The Securities and Exchange Commission today announced that it has charged Atlanta-based investment adviser Charles Augustus Banks, IV with defrauding a former professional basketball player by inducing him to invest in a sports team apparel and merchandise company based on a series of misrepresentations about the investment.

The SEC alleges that Banks persuaded his client to invest $7.5 million in Gameday Entertainment LLC and falsely told him that another investor was investing the same amount. The SEC further alleges that Banks told the client that $5 million of the purported $15 million offering would be used for Gameday's ongoing operations, the remaining balance would pay off existing bank debt, and the client would then have a first lien position on Gameday's assets. But Banks allegedly knew there was no other investor, the full $15 million would not be raised, and the bank debt would not be paid off, leaving the client without the first lien position he was promised.

Meanwhile, Banks allegedly misappropriated approximately $543,000 from his client, taking an undisclosed fee of $225,000 out of the client's investment and secretly siphoning $15,000 from each $75,000 monthly interest payment from Gameday to his client for approximately two years.

According to the SEC's complaint filed in federal district court in Atlanta, Banks further deceived the client into signing a personal guarantee on a bank line of credit for Gameday and subordinating his existing Gameday investment to the new line of credit. Banks deceptively had only the signature pages of the personal guarantee and subordination agreement sent to his client and falsely represented the terms of the agreement contained in the other pages. Banks allegedly pocketed the "guarantee fee" that should have been paid to the client in exchange for providing the guarantee.

The SEC's complaint charges Banks with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The complaint seeks a permanent injunction, disgorgement of ill-gotten gains plus interest and penalties, and an officer-and-director bar.

The SEC's investigation was conducted by John G. Westrick and supervised by Stephen E. Donahue of the SEC's Asset Management Unit and Atlanta Regional Office. The litigation will be led by H.B. Roback.

SEC Complaint



Modified: 09/12/2016