U.S. Securities and Exchange Commission
Litigation Release No. 18324 / September 5, 2003
Securities and Exchange Commission v. Mohamed Wael Ibrahim Elzein, Individually d/b/a Focus Mentors Elzein Management; Hussein Hassan El Zein; and Darin Raymond Knee, Civil Action No. 3:03-2843-10 (D.S.C.).
SEC Charges Mohamad Elzein, Hussein El Zein And Darin Knee With Conducting A Fraudulent, Unregistered Offering of Securities
The Securities and Exchange Commission (the "Commission") announced that on September 2, 2003, it filed a complaint in the United States District Court for the District of South Carolina against Mohamad Elzein, individually and d/b/a/ Focus Mentors Elzein Management; Hussein El Zein; and Darin Knee. The complaint alleges that from approximately July through October 2001, the defendants raised approximately $541,000 from investors in a fraudulent, unregistered offering of securities. At the time of the conduct alleged in the complaint, Mohamad Elzein and Hussein El Zein were residents of Columbia, South Carolina. Knee is a resident of Winter Park, Florida.
The Commission's complaint alleges that the defendants offered and sold securities to investors in the form of investment contracts. According to the complaint, no registration statement was filed with the Commission in connection with the offers and sales, and no exemption from registration exists. The complaint alleges that the offering documents used, variously, all of the following names in describing the entity that was sponsoring the investment: Focus Mentors Elzein Management, FMEM and FMEM International, Inc. (collectively referred to as "Focus Mentors"), as well as FEME Focus Enterprises, Inc. The latter is a Georgia corporation solely owned by another individual, and the corporate name was used without the knowledge or consent of the owner.
According to the complaint, the defendants made materially false and misleading statements and omissions in connection with the offers and sales of the investment contracts including, among other things, false historical returns, and promised returns without a reasonable basis therefor. Also, according to the complaint, the private placement memorandum utilized by the defendants inaccurately stated that Focus Mentors was fully insured by Allstate Insurance Company, such that the assets of Focus Mentors were protected in the unlikely case that Focus Mentors or its executives were to declare bankruptcy. The complaint further alleges that the private placement memorandum falsely stated that each client's principal investment was protected in the case of acts of dishonesty. These statements were false because Focus Mentors did not have such insurance.
The complaint also alleges that Knee promoted Focus Mentors on his MoneyJoe.com website and in his related electronic newsletter called "Insiders Club." Among other things, the complaint alleges that Knee's website described Focus Mentors as a "secure opportunity" with "107% plus principal guaranteed" even though Knee had no reasonable basis for such statements. The complaint also alleges that in some of newsletters, Knee referred to investments in Focus Mentors as a "zero risk opportunity." In other newsletters, according to the complaint, Knee falsely stated that Focus Mentors investors were guaranteed the same security that they could find at a bank.
The complaint alleges that by their conduct, the defendants 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. The Commission seeks, with respect to each defendant, permanent injunctions, accountings, disgorgement, prejudgment interest and civil penalties.