SEC Charges Florida Cash Advance Company, Former CEO with Defrauding Thousands of Retail Investors
Securities and Exchange Commission v. 1 Global Capital, LLC, Carl Ruderman, et al., No. 18-civ-61991 (S.D. Fla. filed August 23, 2018)
The Securities and Exchange Commission today announced charges against 1 Global Capital LLC and its former chief executive officer for allegedly defrauding at least 3,400 retail investors, more than one-third of whom invested their retirement funds. The Florida-based cash advance company and former CEO Carl Ruderman allegedly fraudulently raised more than $287 million since 2014 in unregistered securities sold through a network that included barred brokers.
On August 23, 2018, the Honorable Judge Beth Bloom of U.S. District Court for the Southern District of Florida granted the SEC's request for a temporary asset freeze against Ruderman and other Ruderman companies charged by the SEC as relief defendants. The Court also granted the SEC's request to appoint a receiver over certain of the relief defendants - Bright Smile Financing, LLC, BRR Block, Inc., Digi South, LLC, Ganador Enterprises, LLC, Media Pay LLC, and Pay Now Direct LLC. The Court scheduled a hearing for September 7, 2018, for Ruderman and the relief defendants to show cause, if any, why the asset freeze Order should not continue for the pendency of the litigation or until otherwise ordered by the Court.
According to the SEC's complaint unsealed yesterday, although investors were promised profits from 1 Global's loans to small and mid-sized companies, a large portion of their money went to Ruderman's lavish personal spending and to his consumer-loan companies, Bright Smile Financing LLC and Ganador Enterprises LLC, which had nothing to do with 1 Global's cash advance business. Investors in 1 Global allegedly were given bogus account statements and were falsely told that it had an independent auditor, and that its secured loans, typically for small amounts, had low default rates. According to the complaint, in contrast to what it told investors, 1 Global marketed itself to business borrowers as a low-hassle way to access cash quickly, often made large, unsecured loans, and had significant problems with collections. 1 Global declared bankruptcy in July and Ruderman resigned from the company.
The SEC's complaint charges 1 Global and Ruderman with violations of Sections 5(a), (c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a)(1) and Rule 10b-5 thereunder of the Securities Exchange Action of 1934 ("Exchange Act"). Additionally, the complaint charges Ruderman with aiding and abetting 1 Global's violations of Section 10(b) and Rule 10b-5, and with violating Section 20(a) of the Exchange Act. The SEC seeks disgorgement of allegedly ill-gotten gains and prejudgment interest from the defendants and relief defendants, and financial penalties against the defendants.
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