SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17033 / June 11, 2001
SECURITIES AND EXCHANGE COMMISSION v. REED E. SLATKIN, Civil Action No. 01-04823 (C.D. Cal.)
On June 7, 2001, the U.S. District Court for the Central District of California entered a Judgment of Permanent Injunction against Reed E. Slatkin. The judgment enjoins Slatkin from future violations of the antifraud provisions of Sections 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) and 206(2) of the Investment Advisers Act of 1940 and the investment adviser registration provisions of Section 203(a) of the Investment Advisers Act. The judgment provides that the amount of disgorgement and civil penalties that Slatkin will have to pay, will be determined later. Slatkin, without admitting or denying the allegations in the complaint, consented to the entry of the injunction.
On May 11, 2001, the Securities and Exchange Commission ("Commission") obtained a temporary restraining order and asset freeze against Reed E. Slatkin, a co-founder, former director and substantial shareholder of Earthlink, Inc., in federal district court in Los Angeles. The Commission alleged that Slatkin defrauded as many as 500 clients through his unregistered investment advisory business located in Santa Barbara, California.
From 1985 to April 2001, Slatkin managed at least $230 million for about 500 clients through purported securities trading accounts in Switzerland. The Commission's complaint alleged that in February 2001, Slatkin misappropriated $10 million in client funds that he had received purportedly to invest in a money market fund and misused the client's funds by using $6.975 million to pay other clients and using over $24,000 to pay personal expenses, including credit card bills, telephone and other utility bills, fees at two country clubs, and pool maintenance fees. The Commission further alleged that the Swiss trading accounts did not exist and that Slatkin was merely operating a fraudulent securities scheme.
For additional information, see Litigation Release No. 16998 (May 11, 2001).http://www.sec.gov/litigation/litreleases/lr17033.htm