SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17422 / March 19, 2002
Securities and Exchange Commission v. ACE Payday Plus, LLC d/b/a ACE Payday Plus II, LLC, ACE Management, LLC, ACE Payday Management, Inc., and James Bianco, Case No. 1-02-20858-Civ.-Ungaro-Benages (S.D. Fla. March 19, 2002)
SEC BRINGS EMERGENCY ENFORCEMENT ACTION AGAINST SOUTH FLORIDA CHECK CASHING BUSINESS AND AFFILIATES
Today, the Commission filed an emergency enforcement action in the United States District Court for the Southern District of Florida against ACE Payday Plus, LLC, d/b/a ACE Payday Plus II, LLC ("Ace Payday"), a start-up company purportedly offering "check cashing" and "payday advance" services; ACE Management, LLC and ACE Payday Management, Inc., two entities separately identified as Ace Payday's Manager; and James Bianco ("Bianco"), who controlled Ace Payday and its affiliates. The Commission alleges that defendants raised at least $800,000 from at least 30 investors by fraudulently offering and selling membership units in Ace Payday through telemarketers called "independent sales offices" or "ISOs." The Complaint alleges that defendants told investors that 90% of the offering proceeds would be used to develop Ace Payday's business when, in truth, 40% to 45% went to the ISOs as sales commissions. The Complaint also alleges that defendants lured investors by promising excessive investment returns and by baselessly projecting wildly optimistic profits of up to 720% per year. On the Commission's motion, the court issued an order temporarily restraining defendants from violating the antifraud and registration provisions of the federal securities laws, freezing defendants' assets, and granting other emergency relief. A hearing on the Commission's motion for a preliminary injunction is scheduled for April 5, 2002.
The Complaint names as defendants:
Ace Payday, a Florida limited liability company headquartered in North Miami Beach, Florida.
Bianco, a resident of North Miami Beach, Florida, and the chief executive of Ace Payday, Ace Management, LLC, and Ace Payday Management, Inc.
Ace Management, LLC, identified in the offering materials as a Florida limited liability company, Ace Payday's "Manager," and "a professional payday advance and check cashing Management Co."
Ace Payday Management, Inc., a Florida corporation identified on Ace Payday's Florida state filings as the LLC manager for Ace Payday.
The Complaint alleges that:
Defendants have conducted the offering by means of various written materials, which they sent to prospective investors at the direction of the ISOs. In these materials, defendants describe Ace Payday as a start-up company in the business of providing "retail payday advance" and "check cashing" services, claim that check cashing is possibly "the fastest growing industry in America today," and encourage investors to "[t]ake advantage of participating in this lucrative industry." Defendants project that the company's payday loan operations will yield "an average of up to 360% profit per year" and that the company's check cashing operations will generate "up to 720% per year." They offer investors (a) interest at the rate of 20% per annum to be paid at a rate of 5% each quarter for three years, and (b) a pro-rata share of the company's profits. In truth, between 40% and 45% of the offering proceeds have been used to compensate the ISO's, which act as unregistered brokers soliciting unsophisticated investors. Defendants have no basis for promising 20% interest payable quarterly or projecting such optimistic profits - especially now, as Ace Payday already has failed to meet its quarterly obligations to investors.
The Commission's complaint charges all of the defendants with violating the antifraud and registration provisions of the federal securities laws, specifically Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. In addition to the emergency relief described above, the Complaint seeks permanent injunctions prohibiting future violations of the securities laws, disgorgement, and civil penalties.