UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17057 , June 29, 2001
SECURITIES AND EXCHANGE COMMISSION V. GARRY W. STROUD, INDIVIDUALLY AND D/B/A DIAMOND GLOBAL HOLDING TRUST, EURO CREDIT AND EXCHANGE BANK LTD., AND ANGELIC INTERNATIONAL ; Case No. CIV-01-999 L, USDC, WESTERN DISTRICT OF OKLAHOMA, OKLAHOMA CITY DIVISION
The United States Securities and Exchange Commission ("Commission") announced that on June 28, 2001, United States District Court Judge Lee R. West, issued emergency orders, including a temporary restraining order and asset freeze, against Garry W. Stroud, an alleged Internet investment swindler operating from British Columbia, Canada, and Lynden, Washington. The Commission's complaint charged Stroud with conducting an ongoing Internet investment scheme that fleeced over 2,200 investors worldwide of approximately $1 million since 1998. According to the Commission's complaint, Stroud, operating under several fictitious businesses, used Internet websites and e-mail to hawk seven spurious investments, including so-called "Morgenthau Gold Bond Certificates," foreign gold-mining projects, and "prime-bank" trading programs, promising investors extraordinary returns with little or no risk. The complaint further alleged that these investments were, in every case, pure shams and that Stroud had not paid a single investor the promised returns. Stroud was assisted in the scheme, according to the complaint, by Adele Louros, whom it named as a relief defendant. Moreover, according to the complaint, Stroud targeted his fraudulent investment offerings mainly to investors who were recently defrauded in another investment scheme. That scheme, known as E-Biz Ventures, was the subject of a Commission enforcement action in January 2001 involving over 20,000 investors and over $9 million. SEC v. E-Biz Ventures, et. al, Lit. Rel. 16886, February 1, 2001.
Garry W. Stroud, age 55, is a Canadian citizen residing in Aldergrove, British Columbia, Canada. Stroud operated several fictitious entities, including "Diamond Global Holding Trust," "Euro Credit and Exchange Bank Ltd.," and "Angelic International."
Adele Louros, age unknown, is a Canadian citizen residing in Montreal, Ontario, Canada. Louros is the named holder of several Internet payment accounts into which at least $300,000 of investor funds solicited by Stroud has been deposited. Louros is named in the lawsuit as a "relief defendant" solely for the purposes of equitable relief.
The Commission's complaint alleged that Stroud offered the following bogus investments:
The Angelic International Offering
Using the name Angelic International, Stroud offered an "international high yield trading" program in which investor money would purportedly double every 22-days. Individual victims invested as little as $100 or as much as $10,000. Although Angelic International had purportedly completed four or five 22-day investment "cycles," the program was a complete fabrication and never produced any returns to its investors.
The Morgenthau Gold Bond Offering
Stroud, operating as Euro Credit, offered a new "high yield investment program" involving trillion-dollar, "Morgenthau Gold Bond Certificates", purportedly issued by the United States government in 1934. Stroud called himself a "merchant/commercial" banker with access to numerous of the so-called Morgenthau bonds, which he claimed could be sold back to the government at a steep profit. Stroud claimed that investors who participated in the Morgenthau program could "net a return of as much as 5:1 on [their] invested capital over 60 to 90 days" and that the investment was backed by certificates of deposit by his Euro Credit bank. In fact, the Morgenthau gold bonds did not exist.
The "China Project"
Operating as Diamond Global, Stroud solicited investors in a supposed ongoing Chinese mining operation that extracted gold "tailings" from previously abandoned Chinese gold mines. Stroud claimed that China had given Diamond Global the rights to the operation because China lacked the required technology to extract the gold from the tailings. Stroud "guaranteed" estimated returns exceeding $1 billion on the project and claimed that the "Bank of China" had extended financing to Diamond Global. Each of these claims was false and the mining operation did not exist.
The "Mexicali Project"
As Diamond Global, Stroud claimed to own the rights to develop several gold mines in Mexico and that one of the mines had "proven" gold reserves of between $10 billion and $15 billion. Stroud was purportedly to use investor money to pay the combined cost of the mining operations and to share the profits with investors. In reality, there were no such mining operations.
The Diamond Global "Prime-Bank" Offerings
In addition to the prime-bank investment offered under Angelic International, Stroud offered three others under Diamond Global. Stroud called these offerings the Evergreen II, Destiny, and Omega projects, promising investors incredible returns through mysterious, foreign "trading" or "delayed roll-over" programs. In reality, these programs did not exist.
Stroud's various investment schemes came to the Commission's attention after he tendered a $9 million check to the United States District Court in the E-Biz litigation, purportedly to reimburse the E-biz investors. He wrote the check on an account at Euro Credit bank, which, as noted above, does not exist. Hence, the check bounced. In explaining away the bad check to E-Biz investors, Stroud claimed that he had simply withdrawn it because the Court and the Commission intended to steal some of the money. According to the Complaint, the Commission's follow-up investigation confirmed that Euro Credit was not a bank and that the check was bogus. The Commission alleged in its complaint that Stroud's motive for tendering the $9 million check to the court in the E-Biz litigation was to obtain access to the E-Biz investors to pitch them on his own investments. In fact, a number of the victims in Stroud's investment schemes were also E-Biz investors.
In its lawsuit, the Commission has sought emergency orders: (1) temporarily restraining and enjoining Stroud from continuing to violate the federal securities laws; (2) freezing all of his assets and the assets of Louros derived from the scheme; (3) requiring Stroud and Louros to furnish accountings, (5) repatriating proceeds moved abroad; (6) prohibiting the destruction of documents; and (7) authorizing expedited discovery.
The Commission alleged that Stroud violated the following provisions of the federal securities laws: (1) the antifraud provisions, at Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder; (2) and the registration provisions, at Sections 5(a) and 5(c) of the Securities Act. In addition to the emergency relief described above, the Commission is seeking preliminary and permanent injunctions restraining future violations of the foregoing provisions of the federal securities laws, an order requiring the defendant to disgorge all wrongfully obtained profits plus prejudgment interest, and civil penalties. The Commission is also seeking the disgorgement of fraudulent proceeds from the relief defendant.
For tips on how to avoid Internet "pump-and-dump" stock manipulation schemes, visit http://www.sec.gov/investor/online/pump.htm. For more information about Internet fraud, visit http://www.sec.gov/divisions/enforce/internetenforce.htm. To report suspicious activity involving possible Internet fraud, visit http://www.sec.gov/complaint.shtml.