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SEC Files Prime Bank Fraud Lawsuit

According to a recent suit filed by the U.S. Securities and Exchange Commission (SEC), Thomas G. Ellis and Yasuo Oda, through their company, North Star Finance LLC, Thomas H. Vetter, and Michael K. Martin and Sharon L. Salinas, through their companies, Capital Source Lending LLC and Capital Source Funding LLC (collectively the “Defendants”) allegedly engaged in a “prime bank” fraud scheme. These schemes generally involve the purported trading and or use of financial instruments affiliated with international banking institutions or other sources.

In this case, the Defendants allegedly lured investors into complicated transactions involving bank guarantees and other financial instruments that would supposedly generate millions of dollars in profits for them. The SEC alleged that North Star and Capital Source collected approximately $5 million from defrauded investors and that the Defendants used the investors’ money for their own personal benefit. The SEC claims the investment programs were fictitious and the Defendants never obtained or “monetized” international bank investments to secure funding as guaranteed.

The Defendants made many material misrepresentations to the investors to perpetrate the schemes. For example, the SEC alleged that Mr. Ellis, Mr. Vetter, and Mr. Martin continuously lied to investors about the supposed bank instrument investments and the use of the funds. Mr. Ellis and Mr. Oda, allegedly pressured investors to sign phony documents on false pretenses that the investment program was both legitimate and only available for a certain time period. Mr. Martin allegedly told an investor, that he had been involved in seven other transactions and that he “secured” and “monetized” bank guarantees which, according to the SEC, was false. Ms. Salinas allegedly participated in the scheme by creating bank accounts for Capital Source Funding, falsely representing herself to be an escrow officer and signing a fake escrow agreement to mislead investors.

According to the SEC, none of the securities offered or sold by or for the Defendants have been registered with the Commission. Further, none of the Defendants were registered as broker-dealers, which is required for offering securities to investors. The SEC charged that these defendants violated the anti-fraud and registration provisions of the Federal Securities Laws, and that they will continue to violate those provisions unless restrained or enjoined by the Court. The action is pending in the U.S. District Court in Maryland.

Attorney Pearce began his career at the SEC as an enforcement attorney more than 35 years ago. His SEC defense law practice clients have included public companies and their officers and directors, broker-dealers, investment advisors, and individuals being investigated in connection with their personal securities transactions. He has broad, extensive experience in matters arising from alleged 10b-5 fraud violations including, “insider trading,” Section 16(b) “short swing profit,” and Section 14 “proxy rule” violations as well as Section 9 “market manipulation” cases.

Have you have been contacted by the SEC or believe that you may be subject of an investigation? If so, call Mr. Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce defends various entities and individuals who may be the subject of an SEC investigation or enforcement action regarding their alleged involvement in securities laws violations.

This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 35 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to representing investors and financial industry professionals throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.