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U.S. Securities and Exchange Commission


Litigation Release No. 17735 / September 18, 2002

Securities and Exchange Commission v. J. Scott Eskind, Lorus Investments, Inc., and Capital Management Fund, Limited Partnership, United States District Court for the Northern District of Georgia, Civil Action No. 1:02-CV-2429

The Securities and Exchange Commission ("Commission") announced that on September 12, 2002, the Honorable Marvin H. Shoob, United States District Judge for the Northern District of Georgia, entered an order of preliminary injunction and other relief as to defendants J. Scott Eskind ("Eskind"), Lorus Investments, Inc. ("Lorus") and Capital Management Fund, Limited Partnership ("Capital"). The order restrained and enjoined Eskind, Lorus and Capital from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder The order further restrained and enjoined Eskind and Lorus from violating or aiding and abetting violations of Section 206 of the Investment Advisers Act of 1940.

Eskind, Lorus and Capital consented to the entry of this order without admitting or denying the allegations set forth in the Commission's complaint, filed on September 3, 2002. The Commission's complaint alleged that Eskind was a recidivist violator who was preliminarily enjoined in June 1997 and permanently enjoined on January 12, 1998 from violating the antifraud provisions of the federal securities laws. Eskind was subsequently barred by the Commission from association with any investment adviser. That case was based upon allegations of fraudulent conduct by Eskind which included misappropriating investors' funds.

The complaint alleged that subsequent to being enjoined, and continuing until the present, Eskind had raised at least $3 million through sales of limited partnership units in Capital. Capital purportedly does business by trading in securities through initial or secondary public offerings. The sales materials misrepresented to investors Eskind's broker-dealer experience, and did not disclose his 1991 NYSE suspension, the Commission's 1997 civil action or the Commission's 2000 order barring him from association with an investment adviser.

The complaint alleged that investors were told that IRA accounts had been opened for them at a trust company which serves as an IRA custodian. Investors received statements from Lorus indicating their funds in those accounts. In fact, no such accounts were opened. The sales materials falsely stated that a major law firm provided legal representation for Lorus. Finally, the complaint alleged that Lorus was an investment adviser and Eskind's continuing association with Lorus was a violation of the Commission's 2000 order.

See also: L.R. 17725 (September 13, 2002)



Modified: 09/19/2002