U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19425 / October 12 2005
SECURITIES AND EXCHANGE COMMISSION v. GREGORY APPLEGATE, Civil Action No. 1:05 CV 2363 (N.D. Ohio) (Manos, J.)
The Securities and Exchange Commission ("Commission") announced that on October 7, 2005, Judge Manos of the United States District Court for the Northern District of Ohio entered a Temporary Restraining Order freezing the assets of Gregory Applegate ("Applegate") of Ashland, Ohio. Earlier on the same day, the Commission filed a complaint and motion seeking an asset freeze and other emergency relief.
The Commission's complaint alleged that from 2001 through August 2005, Applegate solicited at least 140 investors to invest at least $5.8 million in a supposed "hedge fund" for "tax-exempt" securities. The complaint alleged that Applegate orally guaranteed an annual rate of return to these investors (ranging from 7% to 8%) and promised to make up any losses out of his own pocket. The complaint alleged that, in reality, Applegate misappropriated investor funds by funneling money to fund an unrelated personal business -- a coffee shop that he operated. In addition, the complaint alleged that, he used investor funds to pay personal expenses and he used new investor funds to pay back earlier investors and that he invested in equity securities that were not tax exempt. The complaint further alleged that to perpetrate his scheme, he provided investors with false monthly "client statements," containing securities holdings and returns that did not exist.
The Commission's complaint alleged that Applegate's conduct violated the antifraud provisions of the federal securities laws. In addition to an injunction and asset freeze, the Commission's complaint also seeks the disgorgement of any investor funds Applegate may have misappropriated as well the imposition of financial penalties.
The Commission would like to thank for their assistance the Office of the United States Attorney for the Northern District of Ohio, the Mansfield Ohio office of the Federal Bureau of Investigation as well as the Ashland Police Department.