SEC Files Fraud and Other Charges in Connection with a Fraudulent Investment Adviser and Private Fund Enterprise
Litigation Release No. 25025 / February 5, 2021
Securities and Exchange Commission v. Stephen Moleski, et al., No. 2:21-cv-01065 (C.D. California filed February 5, 2021)
The Securities and Exchange Commission charged Stephen Scott Moleski (a/k/a Steve Scott) and David Michael with fraud in connection with an investment adviser and private fund enterprise they operated. The SEC also charged Moleski, Michael, and their agent, Erik Christian Jones, with engaging in unregistered offerings of securities and acting as unregistered brokers.
According to the SEC's complaint, during 2018 and 2019, Moleski, Michael, and Jones solicited investors to purchase securities offered by a pair of unaffiliated companies. As alleged, approximately 30% of the funds raised from investors in connection with these two securities offerings were paid, directly or indirectly, to the defendants as commissions. The complaint alleges that none of the defendants were registered as broker-dealers or affiliated with registered broker-dealers at the time. The complaint also alleges that Moleski and Michael, operating through various business entities, acted as investment advisers in connection with three private investment funds that they and their agents, such as Jones, offered and sold to investors beginning in 2019. Moleski and Michael, the complaint alleges, misled investors into believing that the monies investors entrusted to Moleski and Michael would be invested in one or more securities. According to the complaint, however, very little of the money was invested; the complaint alleges that Moleski and Michael instead misappropriated the money and used it to pay personal and business expenses, including sales commissions to agents such as Jones.
The SEC's complaint, filed in the U.S. District Court for the Central District of California, charges Moleski and Michael with violating 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), 206(2), and 206(4) of the Investment Advisers Act of 1940 and 206(4)-8 thereunder, and also charges Moleski, Michael, and Jones with violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act and the broker-dealer registration provisions of Section 15(a)(1) of the Securities Exchange Act. The complaint also names certain business entities associated with Moleski and/or Michael as relief defendants.
The SEC seeks injunctions, disgorgement plus prejudgment interest, and civil penalties against the defendants, and disgorgement plus prejudgment interest from the named relief defendants.
The SEC's investigation was conducted by James Thibodeau and was supervised by Amy Oliver. The litigation will be led by Casey Fronk.
The SEC encourages investors to check the background of anyone selling or offering them an investment using the free and simple search tool on Investor.gov.