SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17474 \ April 17, 2002
SECURITIES AND EXCHANGE COMMISSION V. FREDERICK J. GILLILAND, Defendant, AND MM ACMC BANQUE DE COMMERCE, INC., Relief Defendant, Civil Action No. 3:02CV128-H (W.D. N.C.)
SEC SUES PROMOTER OF MULTIMILLION-DOLLAR, PRIME BANK FRAUD
The Securities and Exchange Commission announced that it filed a civil injunctive action on March 27, 2002, in United States District Court for the Western District of North Carolina against defendant Frederick J. Gilliland and relief defendant MM ACMC Banque de Commerce, Inc. ("MBC").
The Commission's complaint alleges Gilliland, a Canadian citizen who resided in Florida at the time, promoted a multimillion-dollar, prime bank securities fraud raising more than $20 million from at least 200 investors in the United States, Canada and the United Kingdom. The complaint also charges that relief defendant MBC was unjustly enriched by the receipt of $20 million of the ill-gotten gains Gilliland raised through his fraudulent schemes and seeks disgorgement of those funds from MBC.
The Commission's complaint alleges that Gilliland told investors that their money would be used to purchase and trade discounted financial instruments issued by purported prime banks, a term referring to the Top 250 or "Prime" world banks, in a clandestine overseas market to generate huge returns for the investor. The secret trading market Gilliland described to investors does not exist. Further, the complaint alleges that in order to induce people to invest in these fraudulent trading programs, Gilliland made material misrepresentations and omissions of fact to investors concerning, among other things, the existence of the trading programs, unreasonable claims of expected profits from the programs, and the purported safe, risk-free nature of the programs. For example, the complaint alleges that Gilliland led investors to expect profits of between 30% per month to 130% per ten days in purported trading programs where the investments were purportedly fully secured by U.S. Treasury bills.
The Commission's complaint charges Gilliland with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder.
The Commission would like to acknowledge the assistance of the United States Attorney's Offices for the Western District of North Carolina and for the Northern District of Florida, the Internal Revenue Service (Criminal Investigation), and the Federal Bureau of Investigation in this matter.
Additional information on how prime bank and other banking-related investment schemes work can be found at the SEC's Prime Bank Fraud Information Center (http://www.sec.gov/divisions/enforce/primebank.shtml) in the Enforcement Section of the SEC Web site.