Fl Court Enters $3.15M Judgment Against James in Ponzi Scheme Suit

Holding:

The Securities and Exchange Commission (“SEC”) announced that on March 23, 2009, the United States District Court for the Southern District of Florida, entered a final judgment ordering Anthony A. James to pay $2,390,487.45 in disgorgement, plus prejudgment interest of $84,620.10 and a $130,000 civil penalty in connection with his scheme to misappropriate client funds and operate a Ponzi scheme. James is the principal of James Asset Advisory, L.L.C. (“James Asset”), an investment advisory firm, which is also impleaded as a defendant in the civil suit. James had previously consented to a judgment of permanent injunction and other relief in connection with the scheme enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), and Rule 10b-5, thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (“IAA”). The district court entered the injunction on September 25, 2008.

Detailed Summary:

On September 24, 2008, the SEC filed a civil injunctive action against James and James Asset for misappropriating client funds and operating a Ponzi scheme.

The SEC’s complaint alleged that from at least April 2001 through January 2008, defendants received at least $5.2 million from at least 44 clients who were told by defendants that client monies would be invested in stocks, bonds, and mutual funds.

According to the complaint, defendants never invested any client funds in the stock market or other investments. Instead, James misappropriated at least $2.4 million in client monies to fund his lavish lifestyle, including the purchase of a six-bedroom, 5,000 square foot home, a luxury condominium, a Porsche sports car, and season tickets to the Miami Heat games.

SEC also asserted in its complaint that, like a classic Ponzi scheme, defendants transferred approximately $2.8 million from new clients to existing clients to repay principal or to create the illusion of profitable trading. In addition, to facilitate and otherwise conceal ftheir raud, the complaint added, defendants provided clients with false account statements reflecting securities holdings and returns that did not exist.

The SEC’s complaint charged James and James Asset with violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the IAA.

On February 26, 2009, the SEC dismissed, with prejudice, its claims for disgorgement, prejudgment interest and a civil penalty against James Asset because the company is defunct and had no assets from which a judgment could be collected.

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