Another Partially Settled Investment Fund Fraud Case

The Securities & Exchange Commission resolved another investment fund fraud action with two individual defendants. SEC v. Amante Corp., Civil Action No. 09-CIV-61716 (S.D. Fla. Filed Oct. 29, 2009) (discussed here). The action is all too familiar. The complaint names as defendants the fund and its advisers. In this case, it named Amante, Commonwealth Capital Management, Inc. and their president Edward Denigris, along with William Dyer who sold shares. Two other entities were named as relief defendants. Emergency relief was sought. An asset freeze was obtained. Unfortunately, like many of these cases, the investors lost most of their money.

The complaint alleges violations of Securities Act Section 5 and 17(a) and Exchange Act Sections 10(b) and 15(a). Essentially, it claims that for about a year and a half prior to its filing investors paid about $2.3 million for unregistered Amante shares. As is typical in these cases, the investors were lured with false representations. Key to the scheme was a claim that investors would make large returns once an initial public offering of Amante shares was completed. Since that offering was imminent, it was time for investors to buy, or so they were told and unfortunately believed.

According to the Commission, the claims were false. No steps had been taken to conduct an IPO. Thus, there was no imminent offering. There were no imminent profits. All that was imminent was misappropriation by Mr. Denigris - the majority of the $2.3 million investors paid to acquire shares. The purloined funds went to the personal expenses of Mr. Denigris or were transferred to others working at Commonwealth.

Messrs. Denigris and Dyer settled with the Commission. Mr. Denigris consented to the entry of a permanent injunction prohibiting future violations of the sections cited in the complaint. Mr. Dyer consented to the entry of an injunction prohibiting future violations of Exchange Act Section 15(a). Mr. Denigris also agreed to the entry of a penny stock bar, to disgorge $806,349 and pay prejudgment interest along with a penalty of $130,000. Mr. Dyer agreed to disgorge $10,000 and to pay prejudgment interest and a penalty equal to the amount of the disgorgement. The relief obtained is what is pleaded in the complaint. See also Litig. Rel 21626 (Aug. 13, 2010).

There is no explanation for how the amounts paid were calculated. What is clear however, is that less than half of the $2.3 million raised from investors is being recovered, although much of it is alleged to have gone to settling defendant Denigris, according to the complaint.

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