For over a year an a half, there has been an on-going effort to rejuvenate SEC enforcement. Enforcement has new personnel, new organization and new initiatives. During this process the SEC’s market crisis investigations have yielded some significant cases such as the action against Goldman Sachs (here).

At the same time, a new key focus of SEC enforcement appears to be Ponzi scheme cases. On Friday, the Commission brought another of this seeming endless series of cases. SEC v. LADP Acquisition, Inc., Civil Action No. CV 106835 (C.D. Cal. Filed Sept. 14, 2010). See also Litig. Rel. 21655 (Sept. 17, 2010) (dated Sept. 16, 2010 on the SEC website index).

LADP is similar to many other investment fund fraud cases. Here, the action names as defendants William A. Goldstein, Marc E. Bercoon and their related entities. The complaint claims that Messrs. Goldstein and Bercoon perpetrated a “bait-and-switch” scheme on investors. The “bait,” or perhaps the lure, was high profile Hollywood films and TV shows. Specifically, investors were told their funds would ultimately be put in L.A. Digital Post, Inc., a television and film post production company. The offering materials listed well known movie studios and television networks that had been clients of L.A. Digital. It also contained a so-called client list which contained well known TV shows and movies for which L.A. Digital had performed post production services. These claims drew about 100 investors to put about $3.2 million into the defendants’ scheme since mid-2009.

The switch came in what investors actually obtained – certificates representing shares in LADP Acquisition. According to the SEC, that entity had no business operations. Its shares were worthless. Investors were assured that LADP Acquisition was about to conduct an IPO and have its shares listed on a public exchange for trading. Unfortunately no public offering has occurred. Rather, defendants misappropriated over $800,000 of the investor funds and diverted them to their own use.

In filing the complaint, which centers on alleged violations of Securities Act Sections 5 and 17(a) and Exchange Act Section 10(b), the SEC obtained an order: imposing an temporary freeze on the assets of the defendants; preventing the destruction of documents; requiring an accounting from the three defendants; and temporarily enjoining the defendants from future violations of the registration and antifraud provisions of the federal securities laws.

There was a time when investment fund and Ponzi scheme cases such as LADP Acquisition were viewed as difficult to detect. That was the common wit and wisdom as the market crisis began to unfold and Madoff and other high profile failures by SEC Enforcement were discovered. Clearly that is no longer the case. The reason these schemes could not be detected pre-market crisis and pre-Maddoff is the subject of much debate. The reason they are now being discovered with such frequency is also unclear. It may be the market crisis, the new management at the Enforcement Division or simply an intensified focus on Ponzi schemes.

Whatever the reason for the continuous stream of investment fund cases, it is beyond dispute that the dozens of market crisis investigations need to be completed. Those inquiries were launched in the wake of the crisis to root out its causes. These on-going investigations have consumed significant resources. While the few high profile cases spawned from those investigations may suggest that Enforcement is heading in the right direction, its job is far from done. The dominant event of the last few years and quite possibly for years to come is the market crisis. Accordingly, the measure Enforcement’s success may not be how it improved management, but its response to this huge challenge. The question is: Where are those cases?

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