U. S. SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17691 / August 20, 2002
SEC v. Gary A. Eisenberg, CV 02-6479 AHM (JTLx) (C.D. Cal.).
SEC SETTLES CHARGES AGAINST GARY A. EISENBERG FOR RUNNING A $21 MILLION, SEVEN-YEAR PONZI SCHEME
U.S. Attorney Brings Related Criminal Charges
The Securities and Exchange Commission announced today the filing of charges against Gary A. Eisenberg for running a $21 million Ponzi scheme between September 1994 and October 2001, defrauding over 200 investors nationwide. Simultaneous with the filing of the complaint, and without admitting or denying the allegations in the complaint, Eisenberg settled the Commission's action by consenting to a court order that enjoins him from violating the registration and antifraud provisions of the federal securities laws and requires him to return the funds he wrongfully received, plus interest, and pay civil penalties in amounts to be determined.
In its complaint, the Commission accuses Eisenberg, 64, a Los Angeles resident, of fraudulently selling limited partnership interests. The Commission alleges that Eisenberg falsely told investors that they would receive returns of 9% to 18% from profits earned from factoring accounts receivable (i.e., earning interest on loans made to companies that pledge their accounts receivable as collateral for the loans) even though his factoring business had incurred large losses. Eisenberg falsely informed investors that the factoring business was profitable and misused about $9.8 million of investor funds to return investor funds and pay the promised returns. Eisenberg also defrauded investors by misrepresenting that their investments were virtually risk free. In late 2001, Eisenberg's limited partnerships filed bankruptcy and the United States Bankruptcy Court for the Central District of California placed the limited partnerships under a bankruptcy trustee's control.
In its lawsuit, filed in United States District Court for the Central District of California, the Commission alleges that Eisenberg violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
In a related matter, the United States Attorney's Office for the Central District of California announced today that it has filed criminal charges, including securities fraud and mail fraud, against Eisenberg for the conduct alleged in the Commission's complaint.
The Commission acknowledges the assistance and cooperation by the United States Attorney's Office and the Federal Bureau of Investigation in this matter.