SEC Obtains Judgment Against Companies Running Ponzi Scheme
Litigation Release No. 24755 / March 2, 2020
Securities and Exchange Commission v. Neil Burkholz, et al., No. 19 Civ. 24713 (KMW) (S.D. Fla. filed Nov. 14, 2019)
On February 25, 2020, the U.S. District Court for the Southern District of Florida entered a final judgment against Palm Financial Management, LLC and Shore Management Systems, LLC. The SEC previously charged these defendants for their role in an alleged Ponzi scheme that defrauded at least 55 investors.
The SEC's complaint, filed on November 14, 2019, alleged that co-defendants Neil Burkholz and Frank Bianco used Palm Management and Shore Management to solicit investors by falsely representing that their proprietary options trading strategies were highly profitable. In reality, as alleged in the complaint, the defendants invested less than half of investor funds and those investments resulted in near-total losses. The complaint alleged that the defendants misappropriated the remaining funds by using them to repay other investors and by transferring approximately $880,000 of investor funds to Burkholz, Bianco, and their spouses for personal use. According to the SEC's complaint, the defendants sent false reports to investors to conceal their fraudulent conduct and give the investors the false impression they were generating positive returns.
The judgment, entered on the basis of default, finds that Palm Management and Shore Management violated the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgment permanently enjoins Palm Management and Shore Management from violating these provisions and orders them to pay disgorgement and prejudgment interest totaling $624,121 and $599,645, respectively. The SEC intends to seek approval from the Court to establish a fair fund to distribute money received from the defendants to harmed investors.
The SEC's ongoing litigation against Frank Bianco and Neil Burkholz, and relief defendants Suzanne Bianco and Rhoda Burkholz is being handled by Daniel Maher and Brianna Ripa under the supervision of Jan Folena, Amy Friedman, and Carolyn Welshhans.