SEC charges 4 individuals for their roles in prime bank fraud

The SEC's complaint alleges that Marino and Johnson told the investors their funds would be used to pay fees for the "monetization" of a Euros1.5 billion medium-term note ("MTN") issued by an international bank. According to the SEC's complaint, Marino and Johnson promised exorbitant returns and made various other misrepresentations to the investors; in reality, the MTN documentation was an elaborate forgery, and Marino simply used the investor funds himself and transferred some to the other defendants. As alleged, in exchange for a $15,000 fee, Borenstein, a licensed attorney, facilitated the fraud by serving as what he called a "paymaster" and allowing the investor money to flow through his attorney trust account and dissipating it at Marino's direction.

According to the complaint, Brown knowingly or recklessly assisted Marino by connecting Marino with Johnson and the investors in return for a share of the misappropriated proceeds. The SEC's complaint further alleges that after the investment, the defendants lulled the investors with promises of imminent repayment and other misrepresentations.

The SEC's complaint, which was filed in the Central District of California, charges Marino and Johnson with violating the antifraud provisions 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, and in the alternative charges Johnson with aiding and abetting Marino's antifraud violations. The complaint further charges Borenstein and Brown with aiding and abetting Marino's antifraud violations under Section 15(b) of the Securities Act and Section 20(e) of the Exchange Act. The SEC seeks permanent injunctions, disgorgement, prejudgment interest, civil penalties, and conduct-based injunctions against all defendants. The SEC also seeks an officer and director bar against Marino.

The SEC's investigation was conducted by Christopher Nowlin and supervised by Spencer Bendell. The litigation will be led by Daniel Blau and supervised by Gary Leung.

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Original text here: https://www.sec.gov/litigation/litreleases/2023/lr25618.htm