SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17609 / July 12, 2002
SECURITIES AND EXCHANGE COMMISSION v. MICHAEL D. RICHMOND, et al. (United States District Court for the District of Massachusetts, C.A. No. 98cv11378-NG)
The Commission announced today that, the Honorable Nancy Gertner, United States District Judge for the District of Massachusetts, entered summary judgment against Michael D. Richmond ("Richmond") on June 28, 2002. The judgment permanently enjoins Richmond from violating the antifraud, securities and broker-dealer registration provisions of the federal securities laws, and orders Richmond to disgorge his ill-gotten gains of $8.5 million plus prejudgment interest in the amount of $3 million for a total of $11.5 million. The Court also froze Richmond's assets until the disgorgement order is satisfied.
The Commission's action was filed in July 1998 alleging that Richmond operated a Ponzi scheme in which he used internet websites and a network of Liberty Network sales agents to convince unsophisticated investors, including many elderly persons and widows, to liquidate annuities and other investments in order to purchase fraudulent securities issued by Royal Meridian International Bank ("RMIB"). The Commission charged that Richmond falsely claimed RMIB was a fully chartered private offshore bank with offices in Canada, the Bahamas, Guernsey and Turks & Caicos when, in fact, RMIB was a shell with no offices and no apparent significant sources of revenue from which it could pay returns except through the sale of additional fraudulent securities to unwitting investors. Additionally, the Commission charged that Richmond deposited investor funds into a series of money market and bank accounts he controlled and that he used the funds to repay other investors and for Richmond's and others' personal expenses. The Court found Richmond liable for violations of Securities Act of 1933 Sections 5(a), 5(c) and 17(a) as well as Securities Exchange Act of 1934 Sections 10(b) and 15(a) and Rule 10b-5 thereunder.
On April 11, 2001, Richmond pled guilty to 17 counts of an indictment charging him with mail fraud in connection with the RMIB offering and he subsequently was sentenced to 50 months in federal prison, to be followed by three years of supervised release, and ordered to pay $8,372,304.86 in restitution to defrauded investors. United States v Richmond, Criminal Action No. 00-10125-01-JLT (D. Mass.). Any amounts recovered in the criminal case will be credited against the civil disgorgement order.