SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18222/ July 10, 2003
SEC Obtains Emergency Order to Halt Million-Dollar Scam Targeting Retirees
SEC v. Discover Capital Holdings Corp., et al., 03 Civ. 1496 (D.D.C., filed July 9, 2003)
The United States Securities and Exchange Commission on Wednesday brought an emergency action in D.C. Federal District court to halt an alleged ongoing fraudulent scheme largely aimed at retirees who were customers of brokerages that have gone out of business. The Commission's request for a temporary restraining order was granted by the Honorable Judge Rosemary M. Collyer, who also froze $1.1 million of the assets of two of the defendants, Discover Capital Holdings Corp. and Indianapolis Securities, Inc., pending a preliminary hearing.
The Commission's complaint alleges that the defendants, Eli Dinov, his brother Ari Dinov, and David Rubinov used spam e-mail touts and misleading, high pressure sales calls to raise more than $1.1 million through the sale of private placement shares of Uniondale, New York-based Discover Capital Holdings Corp., a company controlled by the individual defendants, through Discover's wholly-owned broker-dealer subsidiary, Indianapolis Securities, Inc.
Eli Dinov is Discover's president, Ari Dinov is Indianpolis Securities' secretary and treasurer, and Rubinov is a 27 year-old securities law recidivist previously barred from association with any broker or dealer. All three reside in Brooklyn, New York.
In its complaint, the Commission alleges that the defendants attained customer accounts from defunct brokerages and used the firms' customer lists to identify potential victims. Having already bilked mostly elderly or retired investors in Florida, Michigan and Wisconsin, the defendants were targeting customers from a recently bankrupt Colorado firm when stopped by the court's order.
In particular, the Commission's complant alleges that:
Specifically, the complaint charges the defendants with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks, against each, civil penalties, disgorgement of all ill-gotten gains plus prejudgment interest, and preliminary and permanent injunctions barring future violations of the anti-fraud provisions of the federal securities laws.
The Commission acknowledges the assistance of NASD Regulation's Market Regulation Department in the investigation of this matter.