U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23685 / November 8, 2016
Securities and Exchange Commission v. Jeffrey D. Smith d/b/a Atlanta Capital LLC a/d/b/a Capital Funding, Inc., Joseph Carswell d/b/a Atlanta Capital LLC a/d/b/a Capital Funding, Inc., and Michael W. Fullard, Civil Action No. 1:16-CV-4171- CAP (N.D. Ga., filed Nov. 8, 2016)
SEC Charges Georgia and South Carolina Residents with Conducting "Prime Bank" Style Fraud Scheme
The Securities and Exchange Commission ("Commission") filed a civil injunctive action today in the United States District Court for the Northern District of Georgia against three individuals for their roles in operating a "prime bank" style investment fraud scheme. The Commission's complaint alleges that Jeffrey D. Smith, of Lithonia, Georgia, and Joseph Carswell, of Marietta, Georgia, defrauded multiple investors out of more than $700,000 by representing to victims that they could procure "medium term notes," "bank guarantees," and "standby letters of credits" worth millions of dollars from reputable banks in exchange for smaller fees ranging between $100,00 and $250,000. Investors were then allegedly told the proceeds from these purported financial instruments would be "monetized" and traded in a manner that would produce returns as high as 35% per week. Smith and Carswell allegedly told investors these transactions were "risk free" and guaranteed. Michael W. Fullard, of Myrtle Beach, South Carolina, is alleged to have acted as a "finder," referring a victim investor to Smith and Carswell in exchange for a fee. The Commission's complaint further alleges that rather than use investor funds to obtain the promised financial instruments, Smith, Carswell and Fullard almost immediately disbursed the investors' funds to themselves, in some cases just hours after they were received. The Commission's complaint charges Smith and Carswell with violations of the antifraud provisions of the federal securities laws under 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. Smith, Carswell, and Fullard are also charged with acting as unregistered broker-dealers in violation of Section 15(a) of the Exchange Act. The Commission's action seeks permanent injunctions, civil penalties, disgorgement plus prejudgment interest, and other relief.
The Commission appreciates the significant assistance provided by the Securities Division of the Georgia Secretary of State's Office.
Investors are cautioned that all "prime bank" investment programs are fraudulent. More information regarding "prime bank" schemes can be found at: