SEC Halts Alleged Ongoing Offering Fraud
Litigation Release No. 24741 / February 20, 2020
Securities and Exchange Commission v. Winston Reed Investments LLC, No. 1:20-cv-38 (W.D.N.C. filed February 10, 2020)
The Securities and Exchange Commission today announced that it has filed an emergency action and obtained a temporary restraining order and asset freeze against a purported investment firm and its principal who allegedly raised money from dozens of investors based on promises of exorbitant returns and then misappropriated over $150,000 of investor funds.
According to the SEC's complaint, beginning in April 2017, Winston Reed Investments LLC and Mark N. Pyatt raised hundreds of thousands of dollars from retail investors by representing they would use a sophisticated trading strategy to trade in futures contracts, foreign exchange, and stocks. Instead, Pyatt allegedly used the vast majority of investor money for personal items, including vehicles, jewelry, groceries, and cigars. Winston Reed and Pyatt also allegedly used a portion of new investor money to make payments to other investors. The complaint further alleges that in an attempt to cover up his fraud, Pyatt provided investors with updates purporting to show substantial monthly returns based on his trading, and later claimed that all investor money had been lost as a result of a broker-dealer not following his trading instructions.
The complaint charges Winston Reed and Pyatt with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and seeks emergency relief, as well as permanent injunctions, disgorgement of allegedly ill-gotten gains with prejudgment interest, and a civil penalty. The complaint also seeks disgorgement of allegedly ill-gotten gains with prejudgment interest from a relief defendant, Daniel G. Randolph.
The SEC's investigation was conducted by Jacqueline M. Moessner, and supervised by Mary S. Brady and Jason J. Burt. The litigation will be led by Leslie J. Hughes, and supervised by Gregory A. Kasper. The SEC thanks the U.S. Attorney's Office for the Western District of North Carolina and the Commodity Futures Trading Commission for their assistance.