SEC Obtains Asset Freeze, Shuts Down
$5 Million Ponzi Scheme
Litigation Release No. 24184/ July 3, 2018
Securities and Exchange Commission v. Edward Lee Moody Jr., et. al., No. 3:18-cv-00442 (E.D.V.A. filed June 27, 2018)
The Securities and Exchange Commission today announced charges against a Virginia investment adviser firm and its sole owner, for operating a nearly $5 million Ponzi scheme. The SEC also obtained an order freezing assets in more than 30 brokerage and bank accounts controlled by the defendants.
According to the SEC's complaint, Edward Lee Moody and his wholly-owned investment adviser firm CM Capital Management, LLC, has operated a Ponzi scheme and defrauded dozens of investors. The SEC alleges that Moody obtained $4.95 million from approximately 60 individuals and entities for investment purposes. Moody represented his firm as a successful money management company that profitably invested client funds in securities. In order to maintain this illusion, Moody and CM Capital made periodic repayments to investors and sent fictitious monthly account statements that purported to show that clients had earned profitable returns on their securities investments. The SEC alleges that, in reality, Moody invested none of the $4.95 million, but instead, he used the investor funds to pay off earlier investors, to fund his own speculative trading, and for personal expenses. Among other expenses, Moody used investor funds to buy a house, a car, remodel his new home, travel, and cover his restaurant and bar tabs.
The SEC's complaint, filed under seal on June 27, 2018 and unsealed July 2, 2018 in the U.S. District Court for the Eastern District of Virginia, Richmond Division, charges Moody and CM Capital Management with violations of the anti-fraud provisions 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, and Sections 206(1) and 206(2) of the Investment Advisers Act.
The court granted the SEC's request for a temporary restraining order freezing assets and other emergency relief. The SEC seeks an injunction, disgorgement, and penalties from Moody and CM Capital. The SEC also seeks disgorgement from relief defendant, G.E. Holdings, a company that the SEC alleges is wholly controlled by Moody and was used to receive and transfer victim funds.
The SEC's investigation was conducted by Devon Leppink Staren and Jeffrey Anderson and supervised by Stacy Bogert and Antonia Chion. The litigation will be led by Nicholas Margida and Daniel Maher, and supervised by Cheryl Crumpton. The SEC appreciates the assistance of the Virginia State Corporation Commission.