U.S. Securities and Exchange Commission
Litigation Release No. 18830 / August 12, 2004
Securities and Exchange Commission v. Bradley T. Smith, Continental Midwest Financial, Inc., Bankstock Investment Partners, LP, Scioto National, Inc. and Bancshareholders of America, Inc., U.S. District Court for the Southern District of Ohio, Civil Action No. C2-04-739 (S.D. Ohio August 11, 2004)
SEC Obtains TRO To Stop Ongoing Bank Stock Investment Scheme
On August 11, 2004, the Securities and Exchange Commission obtained a temporary restraining order against Bradley T. Smith and four companies he controls to stop them from fraudulently raising funds and misusing investor funds. The Commission charged Smith, Continental Midwest Financial, Inc., Bankstock Investment Partners Series #1, LP, Scioto National, Inc. and Bancshareholders of America, Inc., all of Dublin, Ohio, with securities fraud in connection with their offer of interests in entities designed to invest in small bank stocks. The Court's order temporarily bars Smith and the other defendants from fraudulently engaging in their offerings and freezes their assets.
The Commission's complaint alleges that between 2002 and the present, Smith and his affiliated companies, through the private offer and sale of securities, raised approximately $3.3 million from investors in Ohio and six other states. In each of those offerings, Smith and the respective entity represented that the funds raised would be used primarily for investments in small banks. Instead, according to the Commission's allegations, Smith diverted a significant amount of the proceeds to his own use and to keep his other companies afloat. According to the complaint, Smith misused approximately $1.5 million in investor funds, using the money to pay such expenditures as rent, unrelated business expenses, clothing, skin care products and a dating service.
The Commission has charged all the defendants with violations of Section 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 has also charged Bancshareholders of America, Inc. with violations of Sections 206(1) and (2) of the Investment Advisers Act of 1940. The Commission seeks a preliminary and permanent injunction, an accounting, disgorgement of investor funds unjustly received, and civil money penalties.
The Commission wishes to thank the Ohio Department of Commerce, Division of Securities for its assistance in this matter.