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SEC LITIGATION RELEASE
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EXTRACTED KEY WORDS
INVESTORS COMMISSION SECURITIES MUTUAL FUNDS EXCHANGE COMMISSION COMPLAINT MONEY UNITED STATES DAVID DISTRICT ALLEGES POOL ACCOUNTS ACT IMMEDIATE POOLING UNSPECIFIED MUTUAL FUNDS PROSPECTIVE INVESTORS RISK LOSS BANK ACCOUNTS PERSONAL EXPENSES BROKER TRANSACTING CLIENTS INVESTMENT COMPANY ORDER PERMANENTLY ENJOINING COMMITTING FUTURE VIOLATIONS PROMULGATED THEREUNDER |
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 15098 / September 30, 1996
SECURITIES AND EXCHANGE COMMISSION v. DAVID EDWARD FREITAG,
No. 96 C 50345 (N.D. Ill.)(filed September 30, 1996)
The Securities and Exchange Commission announced that on
September 30, 1996, it filed a complaint in the United States
District Court for the Northern District of Illinois against
David E. Freitag (Freitag). The complaint alleges that from at
least August 1993 to August 1995 Freitag operated a Ponzi scheme
that defrauded at least 240 investors of $7 million. Freitag
told investors that he could obtain immediate returns of up to
10% by pooling their funds and subsequently using the pool to
invest in certain unspecified mutual funds. Freitag gave an
additional incentive for investment by telling prospective
investors that the mutual funds offered guaranteed annual returns
of up to 25% and had no risk of loss. Contrary to his
statements, Freitag never invested any of the money he received
in any mutual fund. Instead, he deposited the money in his own
bank accounts and used it to pay returns to earlier investors and
for personal expenses.
The complaint also alleges that the securities that Freitag
offered were not registered with the Commission. Additionally,
Freitag acted as a broker by transacting in securities for his
clients' accounts. However, he was not registered with the
Commission. Finally, the pool of money that Freitag was to have
used to invest in mutual funds constituted an investment company,
which was not registered with the Commission.
In its complaint, the Commission seeks an order permanently
enjoining Freitag from committing future violations of Sections
5(a), 5(c) and 17(a) of the Securities Act of 1933, Sections
10(b), 15(a) and 15(c) of the Exchange Act of 1934 and Rules 10b-
5 and 15c1-2 promulgated thereunder.
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