U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23695 / November 30, 2016
Securities and Exchange Commission v. Blackbird Capital Partners, LLC, et al., Civil Action No. 2:16-cv-01199-TC (D. Utah filed Nov. 28, 2016)
SEC Obtains Asset Freeze and Other Relief in $3.1 Million Offering Fraud
On November 28, 2016, the Securities and Exchange Commission obtained a temporary restraining order and an emergency asset freeze in a $3 million offering fraud and Ponzi scheme orchestrated by Andrew D. Kelley, Paul H. Shumway and their company Blackbird Capital Partners, LLC, a former Commodity Trading Advisor located in Draper, Utah.
The SEC's complaint, filed in federal court in Utah, alleges that since at least September 2014, Kelley and Shumway solicited several investors to invest at least $3.1 million with Blackbird, or through a separate "friends and family" account, which Kelley claimed he managed as a proprietary trading fund. The complaint further alleges that Kelley and Shumway claimed that Kelley's trading had historically produced substantial rates of returns and could do so in the future due to his expertise in trading. According to the complaint, the investments with Blackbird were supposed to be used to invest in various security and futures instruments. Instead, investor funds were used to pay returns to earlier investors and for other personal and business expenses.
The SEC's complaint charges Kelley and Blackbird with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also charges Shumway with violations of Section 17(a) of the Securities Act. The complaint seeks a preliminary and permanent injunction as well as disgorgement, prejudgment interest and civil penalties from Kelley, Shumway and Blackbird.
The SEC's investigation was conducted by Cheryl M. Mori and Scott R. Frost of the SEC's Salt Lake office. The litigation will be led by Amy J. Oliver. The SEC acknowledges the assistance of the Federal Bureau of Investigation and the U.S. Attorney's Office for the District of Utah in this matter.