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SEC Freezes Day Trading Operation
The SEC filed an emergency enforcement action to halt a fraudulent scheme in California being conducted by John Clement and his company, Edgefund Capital LLC. It's alleged that Clement ran a purportedly profitable day trading business out of his home and raised over $2 million since August 2008 from 22 investors in the San Diego area. Clement is accused of hyping the profit potential by falsely promising returns of 1% to 2% per month to investors in his hedge funds - The Edgefund, LP, and The Edge Fund Ltd., LP.
The SEC found that Clement also falsely claimed that the risk potential was limited because of his purported 5% stop-loss rule, and he falsely assured investors that they could request a return of their investments at any time upon written request. The SEC alleges that Clement has misappropriated and misspent all of the investor funds.
The Honorable Larry A. Burns, U.S. District Judge for the Southern District of California, granted the SEC’s requests for an immediate freeze of the assets of Clement and Edgefund Capital and an order prohibiting Clement and Edgefund Capital from destroying evidence. A court hearing was held on Monday, 5/16, on the SEC’s motion for a preliminary injunction.
Clement and Edgefund Capital are charged with violating the antifraud provisions of the Securities Act of 1933 [Section 17(a)], the Securities Exchange Act of 1934 [(Section 10(b), Rule 10b-5] and the Investment Advisers Act of 1940 [Sections 206(1), 206(2) and 206(4), and Rule 206(4)-8].
In addition to the emergency relief, the SEC seeks disgorgement, prejudgment interest, and financial penalties. The SEC’s investigation was conducted by Alka Patel and Solomon Mangolini in the L.A. Regional Office. Karen Matteson will lead the SEC’s litigation.
The case is: Securities and Exchange Commission v. John Clement & Edgefund Capital, LLC, United States District Court for the Southern District of California, Case No. 11CV1034 LAB WVG (filed May 12, 2011).
[SEC Litigation Rel. 21971, 5/16/11]
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