SEC Prevails on Summary Judgment in Prime Bank Fraud Action

The SEC prevailed on summary judgment in an action against Brett Cooper and his related companies centered on three fraudulent schemes. SEC v. Cooper, Civil Action No. 1:13-cv-05781 (D.N.J. ). The first, according to the complaint, was a prime bank fraud scheme in which Mr. Cooper raised about $1.4 million by claiming to have special access to programs that allowed individuals to pool their funds and obtain an investment opportunity typically only available to Wall Street insiders. Through this opportunity they would have access to instruments from the world’s largest banks and obtain returns of up to 1,000% in as little as 60 days. In the second Mr. Cooper offered investors the opportunity to participate in the purchase and trade of a $100 million bank guarantee if the investor funds were pooled in an attorney trust account. The investment opportunity and the account were fraudulent. The third involved the sale of a claimed Brazilian sovereign bond. An investor was told that $50,000 was necessary as a fee to locate and open a brokerage account to market the bond. The documents for the account were forged. The complaint alleged violations of Securities Act Section 17(a) and Exchange Act Sections 10(b) and 15(a).

In its opinion the Court conclude that Mr. Cooper, through his companies, lured investors into fictitious “Prime Bank” or “High-Yield” investment contracts with the promise of extraordinary returns. The scheme centered on the purchase of certain bank instruments that were to be monetized or traded on a platform that generated outsized returns. In fact none of the investors received any payments

The Court also concluded that Mr. Cooper participated in a finders fee scheme through one of his entities. In this scheme Mr. Cooper and his firm entered into arrangements under which they would receive a fee for locating a bank or brokerage firm to accept a so-called Brazilian bond for listing and eventual sale. Using emails and other documents Mr. Cooper made it appear that the bond had been accepted. Overall the Court concluded that Mr. Cooper knew that each of this three investment schemes was a fiction. Over a period of at least four years Mr. Cooper repeatedly violated the law, taking investor funds and using them for his own purposes.

The Court entered a final judgment against Mr. Cooper (and his firms by default), entering permanent injunctions prohibiting future violations as to Mr. Cooper based on Exchange Act Section 15(a) and all defendants as to Securities Act Section 17(a) and Exchange Act Section 10(b). The judgment also directs the payment of disgorgement, on a joint and several basis, in the amount of $2,146,160 and prejudgment interest. In addition, it directs that Mr. Cooper pay a penalty of $2,447,639, Global Funding Systems LLC pay $308,667, Dream Holdings, LLC, $1,264,272, Fortitude Investing, LLC, $320,468, Peninsula Waterfront Development, LP, $500,216 and REOP Group, Inc., $500,216. See Lit. Rel. No. 23406 (Nov. 12, 2015).

See also SEC v. Frederickson, Civil Action No. 1:13-v-05787 (D.N.J.). This related action named as a defendant attorney David Frederickson and his law office. It alleged that he aided and abetted Brett Cooper in two of his prime bank schemes by serving as the escrow agent. The defendants resolved this action, consenting to the entry of permanent injunctions which prohibit future violations of Exchange Act Section 10(b). The injunctions also prohibit each of the defendants from participating in the issuance, offer, or sale of securities involving bank guarantees, medium term notes and similar instruments. The defendants, jointly and severally, will pay disgorgement and prejudgment interest of $7,257 and a civil penalty of $25,000. Mr. Frederickson also consented in a separate proceeding to the entry of an order under Rule 102(e)(3) suspending him from appearing and practicing before the Commission as an attorney.

Tagged with: , ,