SEC Charges Former Owner of Investment Education Franchise with Misleading Investors
Litigation Release No. 24270 / September 17, 2018
Securities and Exchange Commission v. Thomas J. Caufield, Civil Action No.3:18-cv-02468-N, (N.D. Tex, filed Sept. 17, 2018)
The Securities and Exchange Commission today announced charges against the former owner of a Texas-based investment education franchise for lying to dozens of investors in connection with a multimillion dollar offering fraud.
According to the SEC's complaint, Defendant Thomas J. Caufield convinced more than 40 investors to invest over $6 million in his high-yield promissory notes by promising investors significant returns generated from the revenues of what he claimed was a profitable franchise. Caufield allegedly used a combination of false pitches and offering materials to lure investors, who included both students of the franchise and clients of DAT Capital Advisors, LLC-a former state-registered investment adviser wholly owned and operated by Caufield. According to the complaint, Caufield misled investors about the franchise's bleak financial condition, used new investor money to repay earlier investors, and falsely claimed that investors' notes were secured by assets.
The SEC's complaint, filed in the federal district court for the Northern District of Texas, charges Caufield with violations of the antifraud 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 of 1940, as well as the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933. Without admitting or denying the allegations in the SEC's complaint, Caufield consented to the entry of a final judgment that permanently restrains and enjoins him from violating these provisions, and from engaging in certain future activities in connection with the purchase, offer and sale of securities. The final judgment orders disgorgement of $614,815.14 plus prejudgment interest of $126,032.11, both of which will be deemed satisfied by proceeds repaid to certain investors from Caufield's 2018 sale of the franchise. Caufield also agreed to a $160,000 civil penalty and will be barred from further association with certain regulated entities.
The SEC's investigation was led by Robert C. Hannan and Melvin Warren with litigation assistance from Christopher A. Davis, and supervised by Scott F. Mascianica and Eric Werner.