U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19459 / November 8 , 2005
Securities and Exchange Commission v. Russ R. Luciano, et al., 3:03-CV-1614 (M.D. Pa.)
CIVIL AND ADMINISTRATIVE PROCEEDINGS RESOLVED AS TO RUSS R. LUCIANO
The Securities and Exchange Commission (the "Commission") announced today that it has resolved all of its pending litigation with Russ R. Luciano ("Luciano"). Specifically, the Commission announced that on October 6, 2005, the Honorable Richard P. Conaboy, United States District Court Judge, signed a Final Judgment permanently enjoining Luciano from violations of antifraud and registration provisions of the federal securities laws (the "Final Judgment"). SEC v. Russ R. Luciano, et al., C.A. No. 3:03-CV-1614 (M.D. Pa.). Luciano consented to the Final Judgment without admitting or denying the allegations of the Commission's complaint, except as to jurisdiction.
In the civil injunctive action, filed by the Commission on September 15, 2003, the Commission alleged that from 1999 until March 2003, Luciano and his former co-defendants engaged in a scheme to defraud investors through the offer and sale of interests in two unregistered hedge funds. The complaint alleged that, as part of the scheme, the defendants promised to put investors' money into day-trading funds supposedly making from 20% to 120% annually, when in fact, the defendants were misappropriating a large portion of the funds for their personal use and to repay investors who demanded their money. The complaint further alleged that the defendants concealed their scheme by creating and distributing fictitious monthly account statements and other documents which reported false balances and false profits. The complaint alleged that, of $4.5 million invested by over 100 investors, the defendants invested only $1.5 million, $685,800 of which was lost through trading. Under the Final Judgment, Luciano is permanently enjoined from violations of 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.
The Commission also announced today that on October 17, 2005, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (the "Order"). The Order, which bars Luciano from association with any broker, dealer, or investment adviser, is based on the permanent injunctions contained in the Final Judgment, and on a judgment entered on June 30, 2005 in a related criminal action, U.S. v. Russ R. Luciano, Crim. Action No. 3:03-CR-245-02 (M.D. PA).
In the criminal action, which also was filed in September 2003, the United States Attorney for the Middle District of Pennsylvania charged Luciano with mail fraud and conspiracy to commit mail fraud, based on the same facts underlying the civil injunctive action. Luciano pled guilty to a conspiracy count and, on June 30, 2005, the court sentenced him to 50 months in prison, three years of supervised release, and ordered him to pay $1,411,507.98 in restitution.