Litigation Release No. 19859 / October 4, 2006

United States Of America v. Eric Walsh, John Abresch et al., United States District Court for the Southern District of Florida, Crim. No. 1:06cr20071-002-Moore

Former Principal of Coral Springs, Florida Broker-Dealer Which Raised Millions From Investors in a Fraudulent Securities Offering Sentenced to 37 Months in Prison and Ordered to Pay $2.3 Million in Restitution

The Securities and Exchange Commission (Commission) announced today that on September 25, 2006, John P. Abresch was sentenced by the Honorable K. Michael Moore, United States District Court Judge for the Southern District of Florida, to a federal prison sentence of 37 months and ordered to pay criminal restitution in the amount of $2.3 million. Both Abresch and Eric B. Walsh, former principals of Discovery Capital, Inc., a Coral Springs broker-dealer formerly registered with the Commission, were convicted after pleading guilty to violations of the federal securities laws in connection with their role in a "boiler room" operation that fraudulently induced investors in the U.S. and Europe to invest millions. In connection with the fraudulent Discovery Capital offering, Abresch was convicted of wire fraud (18 U.S.C. § 1343) and securities fraud (15 U.S.C. §§ 78j(b)).

In March 2002, the Commission brought an emergency action against Walsh and Abresch, charging them with violations of the antifraud and registration violations of the federal securities laws in connection with Discovery Capital's fraudulent securities offering. In that action, the United States District Court for the Southern District of Florida issued a temporary restraining order and an asset freeze to halt the on-going offering of securities by Discovery Capital. The District Court also appointed a receiver, Michael I. Goldberg, over Discovery Capital. The Commission's Complaint alleged that from at least June 2001 through the filing of the action, Discovery Capital raised approximately $2.7 million through the use of a network of primarily unlicensed sales agents using high pressure sales tactics and making misrepresentations about, among other things, Discovery Capital's growth, its affiliations with well-known brokerage firms and other institutions, and the safety of the investments.

In October 2002, by consent, the District Court permanently enjoined Abresch from violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder, and enjoined Discovery Capital from further violations of Section 17(a) of the Securities Act, Sections 10(b), 15(c) and 17(a) of the Exchange Act, and Rules 10b-5, 15c1-2, 15c3-1, 17a-3, 17a-4, 17a-5, and 17a-11 thereunder. In October 2002, the Court further ordered Abresch to disgorge over $500,000, but waived payment of all but $195,000 and did not impose a civil money penalty based on Abresch's sworn financial statement and other information submitted to the Commission. Subsequently, in April 2003, the Commission barred Abresch from association with a broker or dealer, and in March 2003, the Commission revoked the registration of Discovery Capital.

For further information, see Litigation Release Nos. 17420 (March 19, 2002), 17813 (October 29, 2002), 17812 (October 29, 2002), 17914 (January 7, 2003), 19610 (March 16, 2006), and 19804 (August 16, 2006).