(HedgeCo.Net) The Securities and Exchange Commission has charged Maryland-based Owings Group, LLC, three of its related companies and four individuals in an offering fraud that raised over $5 million from approximately 50 investors.
The SEC’s complaint alleges that from 2013 until at least 2014, Mark Johnson, a convicted felon, orchestrated and operated a fraudulent investment scheme with the assistance of three salesmen, Kevin Drost, Brian Koslow and David Waltzer, who were paid substantial sales commissions from the principal invested. According to the complaint, the defendants deceived investors into believing that Owings was successfully bringing companies public using a quick and efficient streamlined approach, called the Initial Registration Program (“IRP”). In reality, as the SEC alleges, Owings had only an untested idea for a streamlined approach that it was trying out and an inexperienced team. The SEC alleges that when Owings failed to bring any companies public in the first year, Johnson created two investment funds as a stalling tactic to placate concerned investors and to raise new money to “buy out” the IRP investments from disgruntled early investors. The scheme eventually collapsed.
The SEC’s complaint charges Owings, three Owings-related entities and Johnson with violating Section 10(b) of the Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933 (“Securities Act”) and charges Johnson and Owings Capital Funds with violating Section 206(4) of the Investment Advisers Act of 1940 (“Advisers Act”) and Rule 206(4)-8 thereunder. The complaint charges Drost and Koslow with violating Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder and Section 17(a)(2) of the Securities Act and charges Drost, Koslow and Waltzer with aiding and abetting violations of Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c) thereunder and Section 17(a)(1) and (3) of the Securities Act. The complaint charges all defendants with violating the registration provisions of Sections 5(a) and (c) of the Securities Act and charges Johnson, Drost, Koslow and Waltzer with acting as unregistered broker-dealers in violation of Section 15(a) of the Exchange Act. The complaint also charges Johnson as a control person pursuant to Sections 20(a) of the Exchange Act and for committing violations by or through others pursuant to Section 20(b) of the Exchange Act for violations of Sections 15(a) and 10(b) of the Exchange Act and Rule 10b-5(b) thereunder and charges Johnson with aiding and abetting violations of Section 206(4) and Rule 206(4)-8 of the Advisers Act. The SEC seeks civil monetary penalties and disgorgement with prejudgment interest from all defendants, as well as an injunction against future violations. The SEC seeks disgorgement with prejudgment interest from three entities as relief defendants.