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U.S. Securities and Exchange Commission


Litigation Release No. 18570 / February 9, 2004

United States of America v. Edward Thomas Jung, (United States District Court for the Northern District of Illinois, Case No. 03-CR-172)


On February 5, 2004, a federal criminal jury found Edward Thomas Jung guilty on 8 counts of wire fraud and two counts of securities fraud in a case brought by the United States Attorney for the Northern District of Illinois. U.S. District Judge Joan Humphrey Lefkow set sentencing for June 4, 2004. According to the indictment against him, Jung was previously the manager of a hedge fund known as the Strategic Income Fund, L.L.C., and also the controlling general partner of ETJ Partners, Ltd., a broker-dealer through which Jung traded stock options on the Chicago Board Options Exchange. The indictment alleged that from July 1994 to September, 1998, Jung engaged in a fraudulent scheme in which he falsely represented to prospective investors and investors that their pledged securities and cash would be used solely to conduct stock options trading on behalf of the Strategic Income Fund. Instead, Jung misappropriated the investors' assets to collateralize his own securities trading, and other securities trading unrelated to the Strategic Income Fund. Beginning no later than January 1995, Jung also misappropriated pledged securities and cash for other purposes, including paying the expenses of ETJ Partners. In addition, the indictment alleged that Jung misrepresented his trading performance record to prospective investors by distributing written trading track records that inflated the success of his trading for the fund and failed to disclose the adverse financial impact of his misappropriations. The indictment further alleged that Jung distributed false quarterly statements to investors to retain their investments and to lull them into a false sense of security. The indictment alleged that Jung's scheme caused approximately 55 investors to lose more than $21 million.

On June 19, 2001, the Securities and Exchange Commission filed a civil complaint against Jung and ETJ Partners in connection with the scheme described above. The Commission's complaint charged that Jung and his broker-dealer, ETJ Partners, violated the antifraud provisions of the federal securities laws, including Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. On March 14, 2002, the United States District Court for the Northern District of Illinois entered a final judgment order against Jung and ETJ Partners, pursuant to their consent, which enjoined Jung and ETJ Partners from future violations of the above antifraud provisions of the federal securities laws. In addition, on March 28, 2002, the Commission entered an order in an administrative proceeding filed against Jung and ETJ Partners which barred Jung from association with any broker or dealer or investment adviser and which revoked ETJ Partners registration with the Commission as a broker-dealer. For further information, see Litigation Releases 17995 (February 25, 2003), 17041 (June 20, 2001), 17417 (March 15, 2002), and Matter of Edward Thomas Jung and E. Thomas Jung Partners, Ltd., d/b/a ETJ Partners, Ltd., 77 SEC Docket 656 (March 28, 2002).


Modified: 02/09/2004