U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19281 / June 23, 2005
SECURITIES AND EXCHANGE COMMISSION V. IBF COLLATERALIZED FINANCE CORPORATION, ET AL., Case No. 02-CV-5713-JES (S.D.N.Y)
FINAL JUDGMENTS ENTERED AGAINST SIMON A. HERSHON AND INTERBANK FUNDING CORPORATION
The Securities and Exchange Commission announced that on June 9, 2005, the United States District Court for the Southern District of New York entered Final Judgments against defendants Simon A. Hershon (Hershon) and Interbank Funding Corporation (IBF). Hershon was ordered to pay disgorgement of his ill-gotten gains in the amount of $400,000 and a civil penalty in the amount of $500,000. IBF was enjoined from future violations of Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 (Exchange Act). Both defendants consented to the entry of the final judgments without admitting or denying the allegations in the Commission Complaint.
According to the Commission's Complaint, which was filed on July 23, 2002, Hershon and three of his companies, defendants IBF, IBF Collateralized Finance Corporation (CFC) and IBF VI - Secured Lending Corporation (Fund VI), engaged in securities fraud in connection with the offer and sale of $189 million in debt securities between 1997 and 2002. In addition to the fraud, the Complaint alleged that CFC and Fund VI were operating unlawfully as unregistered investment companies in violation of the Investment Company Act of 1940 (ICA).
Previously, on November 26, 2002, the Court granted summary judgment on the Commission's ICA claim against CFC and Fund VI. In addition, the Court rejected defendant Hershon's motion to dismiss the claims of securities fraud.
In a related administrative proceeding (File No. 3-11958), which was instituted on June 20, 2005, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933, Section 21C of the Securities Exchange Act of 1934, Section 203(f) of the Investment Advisers Act of 1940, and Section 9(b) of the Investment Company Act of 1940 (Order) against Hershon. Among other things, the Order (1) directs Hershon to cease and desist from committing or causing any violations, or committing or causing any future violations, of Section 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Exchange Act, (2) bars Hershon from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter, and (3) bars Hershon from association with any investment adviser, with the right to reapply for association after four years to the appropriate self-regulatory organization, or if there is none, to the Commission.