WASHINGTON -- The Securities and Exchange Commission has obtained a preliminary injunction and a continued asset freeze in an alleged investment fraud targeting members of the Jewish community, primarily in the Los Angeles, CA region.
The order, entered on April 10, 2019 by the Honorable Percy Anderson of the U.S. District Court for the Central District of California, preliminarily prohibits Motty Mizrahi and MBIG Company from violating the antifraud provisions of Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 206(1) and (2) of the Investment Advisors Act of 1940.
The SEC's complaint, unsealed on March 29, 2019, alleged that Mizrahi and MBIG defrauded at least 15 advisory clients out of more than $3 million by falsely claiming that MBIG used sophisticated trading strategies to generate "guaranteed" returns of between 2-3% per month, the investments were risk-free, and clients would not lose their money and could withdraw their funds at any time.
Instead, the complaint alleged that that Mizrahi used client money to fund his personal brokerage account, in which he engaged in high-risk options trading, producing losses of more than $2.2 million, and to pay personal expenses.
According to the complaint, Mizrahi covered up his fraud by issuing MBIG's clients false account statements that showed positive account balances and profits from trading and, when clients demanded proof of MBIG's securities holdings, he showed them brokerage statements reflecting a phony multi-million dollar balance for a fictitious MBIG brokerage account.
The litigation is led by Douglas M. Miller and Amy Jane Longo with assistance by David S. Brown, who conducted the investigation. The case is being supervised by Alka N. Patel in the SEC's Los Angeles Regional Office.