Court Approves SEC's Settlement with Entity Defendants with Funds to Be Distributed to Harmed Investors
Litigation Release No. 24452 / April 15, 2019
Securities and Exchange Commission v. Lawrence P. Schmidt, Commercial Equity Partners, Ltd, FutureGen Company (d/b/a FutureGen Capital), FGC Distressed Assets Investment #1, LLC; FutureGen Capital DDA CG Fund LLC; FGC Tax Lien Fund #2, LLC; FGC Trading Fund #1 LLC; FGC SPE NO 1 LLC; FGC SPE NO 2 LLC; and FGC CM Note Fund LLC, Civil Action No. 1:14-cv-01002 (D.D.C. filed June 13, 2014)
On March 11, 2019, a federal district court in Washington, DC entered a final judgment against Defendants Commercial Equity Partners, Ltd., FutureGen Company, and other related entities that were previously used by Defendant Lawrence P. Schmidt to defraud retail investors in connection with unregistered debt offerings. The Court-appointed Receiver for the entities consented to the settlement and final judgment on their behalf.
In its complaint, filed on June 13, 2014, the SEC alleged that Schmidt defrauded investors by creating a web of seemingly legitimate companies, including Commercial Equity Partners and FutureGen Company, that were in fact simply designed to entice investment and conceal his misuse and commingling of investor funds. From 2008 through 2014, Schmidt raised nearly $22 million from over 200 unsuspecting investors who purchased notes from the various companies, siphoning off almost $2 million of investor funds for his own benefit, paying old investors with new investor money and ultimately firing all his employees and fleeing the country when his scheme collapsed. The court previously appointed a receiver at the SEC's request to gather the property and assets of the defendants for distribution back to harmed investors. To date, the Receiver has distributed approximately $2.5 million to harmed investors.
On October 3, 2018, after Schmidt failed to answer the SEC's complaint, the court granted the SEC's motion for a default judgment and entered a final judgment against him, ordering him to pay more than $25 million, enjoining him from future violations of the securities laws, and barring him from serving as an officer or director of a public company. The final judgment against the entity defendants includes disgorgement of $12,025,210 and enjoins the entity defendants from violating the registration and antifraud provisions of the securities laws. The monetary obligation of the entity defendants, but not any obligation of Schmidt, shall be deemed satisfied by the Receiver's distribution of collected assets to harmed investors.