U.S. Securities and Exchange Commission
Litigation Release No. LR 17581 / June 24, 2002
Securities and Exchange Commission v. Von Christopher Cummings, Paramount Financial Partners, L.P., Paramount Capital Management, LLC, John A. Ryan, Kevin L. Grandy and James Curtis Conley, No. C2 02 629 (S.D. Ohio).
Securities and Exchange Commission v. Mark D. Deyak, Misc. No. 1:02 MS 00279 (D.D.C.).
SEC CHARGES OHIO MAN AND CO-DEFENDANTS WITH RUNNING A PONZI SCHEME DISGUISED AS A HEDGE FUND AND DEFRAUDING INVESTORS OF MILLIONS OF DOLLARS; SEC BRINGS SEPARATE ACTION AGAINST LICENSED SECURITIES BROKER TO ENFORCE COMMISSION SUBPOENAS
The Securities and Exchange Commission today filed a civil injunctive action in federal district court in Columbus, Ohio, accusing Von C. Cummings and others of defrauding dozens of investors by conducting a Ponzi scheme through a purported Ohio-based hedge fund, Paramount Financial Partners, L.P. The Commission's complaint alleges that Cummings and various marketers induced investors to pay at least $15 million into the hedge fund from at least May 2000 through March 2001, but that Cummings and others misappropriated or diverted those funds to pay earlier investors and pay personal and business expenses.
The Commission's complaint names the following primary defendants:
- Von C. Cummings, 32, of Dublin, Ohio.
- Paramount Financial Partners, L.P., a Delaware limited partnership.
- Paramount Capital Management, LLC, a Delaware limited liability company and the corporate general partner and alleged investment adviser for Paramount Financial;
- John A. Ryan, 40, of San Francisco, California. The complaint alleges that Ryan was one of Paramount's chief marketers;
- Kevin L. Grandy, 32, of Columbus, Ohio. The complaint alleges that Grandy was another of Paramount's chief marketers; and
- James Curtis "Curt" Conley, age 31, of Columbus, Ohio, a former Paramount employee.
The Commission's complaint alleges that Paramount, through Cummings, Ryan, Grandy and other marketers, falsely portrayed Paramount as a "registered hedge fund" that generated supposed investment returns of as much as 99 percent. Victims were told that Paramount had access to certain discounted securities that they could purchase through Paramount and sell for large profits. Victims were also told that they were required to maintain their principal and supposed profits with Paramount for a set period of time. The complaint alleges that Paramount issued false trade confirmations and account statements to trick investors into believing that Paramount had purchased and sold certain securities for their accounts and generated large profits. Paramount then raised new investor funds that it used to pay earlier investors and to pay personal and business expenses.
The Commission's complaint charges that Cummings, Paramount Financial, Paramount Capital, Ryan, Grandy and Conley violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint further alleges that Paramount Financial and Paramount Capital violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 ("Advisers Act") and that Cummings, Ryan, Grandy and Conley aided and abetted those violations of the Advisers Act.
The complaint seeks, among other things, a temporary restraining order that prohibits the Primary Defendants from accepting funds from actual or potential investors, requires them to provide sworn accountings, and enjoins them from further violations of the securities laws referenced above.
In addition to the primary defendants, the complaint names four relief defendants: U.S. African Corp., Gordon Lending Corp., Gordon L. Yocom, and Patrick Susemihl. The complaint does not charge these relief defendants with substantive violations of the federal securities laws. Rather, because U.S. African, Gordon Lending, Yocom and Susemihl each received investor funds as a result of the primary defendants' misconduct, the Commission is seeking return of those monies.
In a related proceeding, the Commission today filed an action in federal district court in Washington, D.C., to obtain a court order requiring Mark D. Deyak, a licensed securities broker in New York, to obey subpoenas issued in furtherance of the investigation into Paramount's activities. The complaint alleges that Deyak, while a broker with American Investment Services, Inc., received undisclosed commissions for referring brokerage clients to invest with Paramount. The complaint alleges that Deyak failed to comply with subpoenas requiring him to produce documents and appear for testimony.