SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16347 / November 8, 1999
Accounting and Auditing Release No. 1203 / November 8, 1999
Securities and Exchange Commission v. S. Jay Goldinger, Civil Action
No. CV 99-11539-LGB (CTx) (C.D. Cal.) (Nov. 8, 1999)
Securities and Exchange Commission v. Charles S. Strauch and Charles
W. McBrayer, Civil Action No. CV 99-1384-GLT (EEx) (C.D. Cal.) (Nov.
8, 1999)
SEC CHARGES FORMER MONEY MANAGER S. JAY GOLDINGER
WITH DEFRAUDING PAIRGAIN TECHNOLOGIES, INC.
PairGain and Two of its Top Executives Charged with
Financial Disclosure Violations
The Securities and Exchange Commission today charged S. Jay Goldinger,
once a well-known Beverly Hills-based money manager, with stealing
$15.9 million from the Tustin, California-based public company
PairGain Technologies, Inc. The theft occurred as part of a Ponzi-like
scam whereby Goldinger commingled the funds of PairGain and his other
clients, then engaged in a massive securities-futures trading
misallocation scheme. Through the scheme, which occurred during 1994
and 1995, Goldinger shifted tens of millions of dollars from certain
clients, including PairGain, to other clients, while simultaneously
generating enormous commissions, fees, and income for himself. The
Commission also charged PairGain-a designer, manufacturer, and
distributor of telecommunication products-and two of its top
executives with failing to properly account for and timely disclose
what initially appeared to be investment losses from unauthorized
trading, but in reality were thefts by Goldinger.
The SEC's complaints, filed in the Central District of California,
allege that
From September 1993 until November 1995, PairGain invested some of its
excess cash with Goldinger. Goldinger told the company that he could
outperform Treasury securities by using certain proprietary
strategies. Goldinger misrepresented his strategy as fully hedged and
low risk. Unbeknownst to anyone at PairGain, Goldinger was commingling
the company's funds with other investors' funds, placing futures
trades, and routinely shifting profitable trades to some clients and
losses to other clients through massive trade misallocations.
Goldinger's scheme eventually collapsed when he began to suffer
overall trading losses, leaving PairGain and others with tens of
SNIPPETS:
Securities and Exchange Commission v. S. Jay Goldinger, Civil Action No. CV 99-11539-LGB (C.D.
Securities and Exchange Commission v. Charles S. Strauch and Charles W. McBrayer, Civil
SEC CHARGES FORMER MONEY MANAGER S. JAY GOLDINGER
WITH DEFRAUDING PAIRGAIN TECHNOLOGIES, INC.
Financial Disclosure Violations
The theft occurred as part of a Ponzi-like scam whereby Goldinger commingled the funds of
The Commission also charged PairGain-a designer, manufacturer, and distributor of
Unbeknownst to anyone at PairGain, Goldinger was commingling the company's funds with other
That year the company's trading account statements seemed to show large losses, but account
Unable to determine what Goldinger was doing and uncertain whether the company had gains or
The following year, 1995, PairGain invested $28.1 million with Goldinger but told him to buy
PairGain instructed Goldinger to try to recoup the company's losses, and to do so Goldinger
All the while, PairGain, its chairman and former chief executive officer, Charles S. Strauch,
Simultaneously with the filing of the complaint against him, without admitting or denying the
The final judgment will prohibit Goldinger from violating or aiding and abetting or causing
Strauch's final judgment will prohibit him from violating Section 10of the Exchange Act and
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