UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16831 / December 15, 2000
SEC v. Gibbons, (U.S.D.C. N.D. Illinois, Civil Action No. 2247)
The U.S. Securities and Exchange Commission ("Commission") announced that on December 14, 2000, the Honorable Morton Denlow, U.S. Magistrate Judge for the Northern District of Illinois, entered a Final Order and Permanent Injunction ("Order") against Alan C. Gibbons ("Gibbons"), resident of Chicago, Illinois in a misappropriation of funds case. The Order also required Gibbons to disgorge $172,000, the payment of which was is waived based on Gibbons' demonstrated inability to pay. Gibbons consented to the entry of the Order without admitting or denying the allegations in the Complaint.
The Commission's complaint alleges that between September 1995 and March 1999, Gibbons raised approximately $172,000 from seven investors who purchased stock and promissory notes in companies he formed and owned (the Gibbons Companies). Gibbons told investors that their funds would be used for investment in the Gibbons Companies. The Gibbons Companies purportedly included an import/export business, a software marketing business, and a business that would find funding for early stage companies. However, each of the Gibbons Companies conducted little or no business and dissolved quickly.
The Complaint alleges that Gibbons made misrepresentations to investors concerning the use, safety, and liquidity of their investments, as well as the return on their investments.
While Gibbons represented to investors that funds would be deposit into an escrow account for the Gibbons Companies, instead, Gibbons commingled investors' funds in his personal and business bank accounts to pay his personal expenses.
The Complaint further alleges that Gibbons told investors that their investments were risk-free and guaranteed. However, their investments were very risky because the Gibbons Companies engaged in little or no business, there was no guarantor, and Gibbons lacked sufficient liquid assets to repay the investors.
The Complaint further alleges that Gibbons promised large returns on investments in the Gibbons Companies. For example, Gibbons told an investor that he would double or triple his money in a few years. Gibbons told other investors that they would receive at least a 5% return on their investments. The Complaint also alleges that when soliciting investors in the Gibbons Companies to invest more money or to give their investments more time, Gibbons promised returns of 30% to 50% in four months. However, Gibbons did not pay investors any return on investments in the Gibbons Companies.
Gibbons has a history of securities law violations. In 1989, the National Association of Securities Dealers fined Gibbons $25,000, and permanently barred him from association with any member of the NASD for numerous securities law violations. Additionally, in 1994 the Illinois Secretary of State permanently barred Gibbons from offering or selling securities in Illinois, because of his involvement in a fraudulent investment scheme. In 1996, in a criminal action based on the same conduct, a court sentenced Gibbons to a three-year term of probation and ordered Gibbons to pay $15,000 in restitution to an investor whom he defrauded, according to the Complaint.
The Final Judgment and Order of Permanent Injunction and Other Equitable Relief enjoins Gibbons from future violations 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.