U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19083 / February 16, 2005
S.E.C. v. TEK Corporation, Thomas J. Robbins, Douglas L. Litster, Clair W. Cox, and Richard C. Bybee, Docket No. 2:05 CV 00107 (USDC, D. Utah)
On February 9, the Commission filed a complaint in the United States District Court for the District of Utah, seeking permanent injunctions against TEK Corporation and four of its officers and directors: Thomas J. Robbins (Robbins), Richard C. Bybee (Bybee), Clair W. Cox, and Douglas L. Litster (Litster) (collectively TEK management). In addition to the injunctive relief, the complaint seeks disgorgement and civil money penalties from the defendants.
The complaint alleges that the defendants fraudulently sold approximately $4.5 million of notes and investment contracts to approximately 100 investors located in nine states in unregistered transactions. The complaint alleges that TEK and its management solicited investors for two investment schemes: (1) a day trading program conducted by Robbins in which investors were guaranteed a monthly return of 25% for two years, and (2) a high-yield bank trading program generating returns of 100% a month in which Robbins purportedly used investor funds to trade investment grade instruments of European issuers. It is further alleged that the day trading program actually lost money and that instead of investing funds in the bank trading program, the defendants operated a classic Ponzi scheme.
The complaint further alleges that the defendants made material misrepresentations or omitted to state material facts regarding, among other things: the existence of profits generated by both the day trading and bank trading program; the existence of a bank trading program; the use of investor money to fund TEK's business operations; the diversion of invested funds to TEK's managements' personal use; and the source of money used to pay returns to investors. The complaint also alleges that Robbins misappropriated at least $2 million of the invested funds for his personal living expenses.
The complaint alleges that by engaging in such conduct TEK and its management have 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. In addition, the complaint alleges that TEK violated Section 7(a) of the Investment Company Act of 1940, and that Robbins violated Sections 206(1) and (2) of the Investment Advisers Act of 1940.