Securities: USA's SEC settles unregistered securities offering action
The Securities and Exchange Commission has announced that it has filed a settled Complaint in the United States District Court for the Eastern District of North Carolina against David L. Hersh (Hersh). The Commission alleges that between January 2007 and January 2009, Hersh conducted a fraudulent offering of USD2 million in unregistered securities from his home near Raleigh, North Carolina.
The Complaint alleges that Hersh raised more than USD2 million from twelve investors to invest in an options trading scheme, and that he falsely and misleadingly told the investors that they could expect a 40% annual rate of return and that the program involved minimal risk.
The Complaint further alleges that Hersh misappropriated approximately USD575,000 in investor funds for his personal use and that he lost approximately USD1,136,000 of the funds in risky options trading. According to the Complaint, as part of the scheme, Hersh deceived investors and prospective investors by showing them false trade confirmations and other documents which he created.
The Commission alleges that, by his conduct, Hersh breached Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder.
Hersh has entered into a consent in which he agrees to the entry of a final judgment providing for permanent injunctive relief, disgorgement of proceeds of USD574,936 plus prejudgment interest of USD55,336, and a civil penalty of USD130,000.
Download PDF version of this page