SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16883 / January 31, 2001
Securities and Exchange Commission v. Stewart, et al., Civil Action No. 98 CIV 2636 (S.D.N.Y.)
Judgments Entered Against Two Defendants
in Prime Bank Scheme
The Securities and Exchange Commission announced today that the Honorable Loretta A. Preska of the United States District Court for the Southern District of New York has entered final judgments against two defendants in a "prime bank" scheme. The defendants are H.D. Inc. and St. Barth LTD., two entities involved in promoting the scheme. H.D. Inc., formerly a New Jersey corporation, and St. Barth, formerly registered in the Commonwealth of the Bahamas, both consented to the judgments, without admitting or denying the allegations of the Commission's complaint.
Specifically, both entities consented to the entry of final judgments permanently enjoining them from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. They also agreed to pay disgorgement of $803,470 plus prejudgment interest of $651,507. The Court, however, waived the payment of disgorgement and prejudgment interest and did not impose civil penalties based on the defendants' demonstrated financial inability to pay.
The Commission's complaint alleged that H.D. Inc. and St. Barth, along with others, fraudulently obtained more than $1.7 million from at least three individuals by offering and selling securities in the form of participations in investment programs purportedly to trade prime bank instruments. The trading was to result in spectacular profits for investors--returns of ten to fifty times their initial investments in two months to two years--at no risk. In its complaint, the Commission alleged that the investment programs were scams, the instruments themselves bogus. Instead of using the money as promised, the promoters of the scheme misappropriated the investors' funds for their own benefit, ultimately transferring most of the money to offshore accounts.
Previous judgments were entered against other defendants in this case. See, Lit. Rel. Nos. 15752, 15819, and 16207.
Litigation continues as to the remaining defendants and relief defendants.