SEC Obtains Judgments Against Florida Men in Ponzi Scheme Action
Litigation Release No. 24816 / May 12, 2020
Securities and Exchange Commission v. Neil Burkholz, et al., No. 19 Civ. 24713 (KMW) (S.D. Fla. filed Nov. 14, 2019)
On May 11, 2020, the U.S. District Court for the Southern District of Florida entered final judgments against Neil Burkholz of Boca Raton, Florida and Frank Bianco of Pembroke Pines, Florida. The SEC previously charged Burkholz, Bianco and others in an emergency action where it obtained a temporary restraining order and subsequently a preliminary injunction against the defendants for conducting an alleged Ponzi scheme that defrauded at least 55 investors.
The SEC's complaint, filed on November 14, 2019, alleged that Burkholz, Bianco, and their companies Palm Financial Management and Shore Management Systems solicited 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 against Burkholz, entered on the basis of default, finds that he violated the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgment permanently enjoins Burkholz from violating these provisions and orders him to pay disgorgement and prejudgment interest totaling $429,580 and a $920,825 civil penalty.
Without admitting or denying the allegations in the SEC's complaint, Bianco consented to the entry of a final judgment permanently enjoining him from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Bianco further agreed to pay $443,997 in disgorgement and prejudgment interest, and a $920,825 civil penalty. Further, Bianco's wife, Suzanne Bianco, who the SEC named as a relief defendant, consented to the entry of a final judgment ordering her to disgorge on a joint and several basis with Bianco $49,751, representing the amount of investor funds Bianco paid her, plus prejudgment interest.
In February, the Court ordered over $1.2 million in disgorgement and prejudgment interest against Palm Management and Shore Management. The SEC intends to seek approval from the Court to establish a fair fund to distribute money received from defendants to harmed investors.
The SEC's ongoing litigation against relief defendant Rhoda Burkholz is being handled by Daniel Maher and Brianna Ripa under the supervision of Jan Folena, Amy Friedman, and Carolyn Welshhans.