UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17182 / October 12, 2001
SECURITIES AND EXCHANGE COMMISSION V. GERARD CHIARELLA, INDIVIDUALLY AND D/B/A FREEDOM IN 14 DAYS, WVM FINANCIAL GROUP, AND MINDA TRADING GROUP, Civil Acition No. 3:01-CIV-2037-G, USDC, NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION
On October 10, 2001, the Commission filed a civil fraud action in Dallas, Texas, against Gerard Chiarella in connection with a fraudulent Internet investment scheme. The Commission's complaint alleges that from February to July of this year, Chiarella used spam e-mail and three websites to offer and sell investments in phony "trading" programs, supposedly involving offshore banks. Promising returns of up to 200% per week with no risk, Chiarella's offerings defrauded approximately 325 investors throughout the United States of over $82,000.
Gerard Chiarella, age 34, is a resident of Congers, New York. Chiarella operated websites to offer investments under the names of three fictitious entities: "Freedom in 14 Days," "WVM Financial Group," and "Minda Trading Group."
According to the complaint, Chiarella's offerings appeared on Internet websites and in spam email from at least February 5, 2001, to July 26, 2001. In each offering, Chiarella promised investors risk-free returns, ranging from 100% to 200% per week, from secretive trading programs involving unidentified offshore banks. In reality, these trading programs did not exist, and none of Chiarella's fictitious entities had any legitimate business operations from which to pay investors. Indeed, Chiarella made no payments to investors and converted investor funds to his own use.
In its complaint, the Commission alleged that Chiarella violated the antifraud and the registration provisions of the federal securities laws. Specifically, it is alleged that he violated 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, as well as Sections 5(a) and 5(c) of the Securities Act. The Commission seeks a permanent injunction against Chiarella from future violations of the foregoing provisions of the federal securities laws, an order requiring him to disgorge all wrongfully obtained profits plus prejudgment interest, and a civil money penalty. Simultaneously with the filing of its action, the Commission announced that Chiarella had agreed to a settlement in which he agreed to a permanent injunction and the payment of disgorgement and a civil penalty in amounts to be determined in further court proceedings.
For tips on how to avoid Internet investment schemes, visit http://www.sec.gov/investor/pubs/cyberfraud.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.