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U.S. Securities and Exchange Commission

U.S. Securities & Exchange Commission

Litigation Release No. 18301 / August 21, 2003

SECURITIES AND EXCHANGE COMMISSION v. METROPOLIS HOLDINGS, LLC and EDWARD GRAY, United States District Court for the Eastern District of California, Fresno Division, Civil Action No. F-03-5538


The Securities and Exchange Commission announced that on July 14, 2003, the United States District Court for the Eastern District of California ordered defendants Edward Gray of Fresno, California, and his company, Metropolis Holdings, LLC, to show cause why they should not be held in contempt for failing to account for the funds that they raised from eleven investors worldwide in a fraudulent investment scheme. The Court simultaneously entered a preliminary injunction freezing Gray and Metropolis's financial assets for the duration of the case, including approximately $1.4 million held in ten accounts identified by the Commission. Gray is currently in custody in a related criminal prosecution brought by the United States Attorney for the Eastern District of California.

The Commission filed a complaint against Gray and Metropolis on May 1, 2003, alleging that the defendants raised $5.1 million by selling interests in a non-existent "Asset Management Program" from July to November 2002. Gray lured investors by offering high returns on their investment and promising that investors' funds would be protected by insurance. Instead of investing the money and purchasing insurance, however, Gray dissipated approximately $2 million on personal items, including a new car and jewelry, and on expenditures for unrelated business projects. Account statements indicate that Gray also withdrew hundreds of thousands of dollars in cash, which to date the Commission has not been able to trace. Immediately upon the filing of the complaint, the Court ordered the defendants to account for all of the investors' funds. When Gray and Metropolis failed to comply, the Court entered the July 14 order to show cause why they should not be held in contempt.

Gray and Metropolis have not responded to the complaint. As a result, the Commission has filed a motion for a default judgment, which is currently scheduled to be heard by the Court on September 8, 2003. In the motion, the Commission has asked the Court to find that Gray and Metropolis violated the antifraud and registration provisions of the federal securities laws, specifically Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The Commission has further requested that the Court order defendants to return the proceeds of their fraud to the investors and pay civil penalties, and enter permanent injunctions prohibiting them from committing future violations of the securities laws.



Modified: 08/21/2003