Securities and Exchange Commission v. Brett A. Cooper, Global Funding Systems LLC, Dream Holdings, LLC, Fortitude Investing, LLC, Peninsula Waterfront Development, LP, and REOP Group Inc., Case No. 1:13-cv-05781-RMB-AMD (D.N.J.); SEC v. David H. Frederickson and The Law Offices of David H. Frederickson, Case No. and 1:13-cv-05787-RMB-AMD (D.N.J.).  On October 2, 2013, the SEC announced fraud charges against Brett A. Cooper and his companies Global Funding Systems LLC, Dream Holdings, LLC, Fortitude Investing, LLC, Peninsula Waterfront Development, LP and REOP Group Inc.  According to the SEC, defendants were involved in three different fraudulent schemes.  The SEC alleges that the first scheme was a “Prime Bank Fraud.”  Cooper raised more than $1 million by telling investors that he could invest in special programs by pooling their money.  Cooper told investors that the investment was in financial instruments issueds by large, financially sold banks.  The SEC alleges that he promised returns of up to 1,000% in as little as 60 days.  He also allegedly lied to investors by claiming: (1) the investments were not risky, (2) the investments were collateralized with cash or semi-precious gems, and (3) that investors’ money would remain safe in escrow with attorneys pending the completion of certain steps in the transaction.

In the alleged second scheme, Cooper offered to invest in the purchase and trade of a $100 million bank guarantee if all investor funds were pooled in an attorney client trust account. According to the SEC, Cooper sent a forged escrow agreement with wiring instructions for the attorney client trust account.  In reality, the account was controlled by Cooper.  Cooper raised just under $1 million and took the investors’ money.

According to the SEC, the third scheme involved the sale of a purported Brazilian sovereign bond.  Cooper told investors that in exchange for a $50,000 fee, he would locate a buyer for the bond and open an account at a registered broker-dealer, which Cooper claimed was necessary to sell the bond.  The SEC alleges Cooper forged a letter from to make it appear to be from a broker-dealer showing that the bond had been “accepted” by the broker-dealer.  A deceived investor paid Cooper’s $50,000 fee after getting the fake letter.

The SEC charged Cooper and his companies with violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 15(a) of the Exchange Act.  The SEC also charges Cooper with aiding and abetting violations of Section 17(a) of the Securities Act and Section 10(b) and Rule 10b-5.  The SEC seeks injunctive relief, disgorgement, and civil monetary penalties.

The SEC also announced charges against attorney David H. Frederickson for allegedly aiding and abetting Cooper’s prime bank scheme.   In a separate lawsuit, the SEC alleges that Frederickson served as escrow agent for two of Cooper’s prime bank transactions, and sent letters to investors stating that their investments were secured by collateral owned by Cooper’s company Global Funding Systems LLC.  According to the SEC, Frederickson did nothing to verify the value, authenticity, or ownership of the collateral, which Cooper said were precious gems worth more than $375 million. The SEC also alleges that by the time Frederickson served as escrow agent, he had learned facts indicating that Cooper had affixed Frederickson’s electronic signature to a forged escrow agreement that caused investor funds to be diverted to another Cooper company instead of being sent to Frederickson’s escrow account.

Without admitting or denying the SEC’s allegations, Frederickson and his firm agreed to settle by consenting to the entry of a final judgment that (1) permanently enjoins them from violating or aiding and abetting violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5; (2) permanently enjoins each of them from providing professional legal or escrow services in connection with, or from participating directly or indirectly in, the issuance, offer, or sale of securities involving bank guarantees, medium term notes, standby letters of credit, structured notes, and similar instruments, provided, however, that such injunction shall not prevent Frederickson from purchasing or selling securities listed on a national securities exchange; and (3) orders them to pay, jointly and severally, disgorgement and prejudgment interest totaling $7,257, and a civil penalty in the amount of $25,000, for a total of $32,257.  As part of the settlement, Frederickson, without admitting or denying the Commission’s findings, has also consented to the entry of a Commission order pursuant to Rule 102(e)(3) of the Commission’s rules of practice permanently suspending him from appearing or practicing before the Commission as an attorney.