SEC Seeks Emergency Relief Against Equipment Leasing Company and its Founder in $80 Million Fraud
Litigation Release No. 24158 / June 6, 2018
Securities and Exchange Commission v. Ralph T. Iannelli et al., Civil Action No. 2:18-cv-05008 (U.S. District Court for the Central District of California)
The Securities and Exchange Commission charged an equipment leasing company and its founder with defrauding investors in connection with sales of over $80 million in promissory notes.
According to the SEC's complaint, between 2014 and 2017, Essex Capital Corporation and its founder, Ralph T. Iannelli, made a series of false and misleading statements and illusory personal guarantees to registered investment advisers to induce them to invest millions of dollars of their clients' money in Essex's failing equipment leasing business. The SEC alleges that Essex and Iannelli provided one investment adviser with fake financial statements that overstated Essex's assets by more than $20 million and falsely told another investment adviser that Essex would assign equipment leases to its clients when the same leases had already been pledged as collateral for bank loans. The SEC's complaint further alleges that as Essex's finances deteriorated, the company resorted to frequent Ponzi-like payments, paying interest and principal to existing Essex investors with funds raised from newer investors. At the same time, Iannelli allegedly paid himself millions of dollars in bonuses and siphoned millions of dollars out of Essex through interest-free loans with no maturity date. According to the SEC, Iannelli personally owes the company over $6.4 million.
The SEC's complaint, filed in the U.S. District Court for the Central District of California, charges Iannelli and Essex with violations of Section 17(a) of the Securities Act of 1933 and 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder. It seeks disgorgement of allegedly ill-gotten gains along with interest, monetary penalties, and permanent injunctions against Iannelli and Essex. The SEC has also requested emergency relief against Defendants, including a preliminary injunction, an asset freeze, and the appointment of a receiver over Essex.
The SEC's investigation was conducted by Yolanda Ochoa, Marc J. Blau, and Rhoda Chang with assistance from the Office of Compliance, Inspections and Examinations. The litigation will be led by Douglas Miller and Gary Leung and supervised by Amy Jane Longo.