Blotter, February 2010
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Farsi Fraud
The Securities and Exchange Commission charged and froze the assets of Beverly Hills, Calif.-based NewPoint Financial Services, Inc. and its co-owners John Farahi and Gissou Rastegar Farahi, and its controller Elaheh Amouei, for conducting an unregistered offering fraud aimed at Iranian-Americans in the Los Angeles area.
The SEC complaint, filed in federal district court in Santa Ana, Calif., alleges Farahi targeted the Iranian-American community by touting New Point on a daily finance program that he hosted on a Farsi language radio station in the Los Angeles area. According to the SEC Farahis or Amouei would then make appointments with interested listeners to discuss investment opportunities offered by NewPoint. NewPoint allegedly misled more than 100 investors into purchasing more than $20 million worth of debentures that they falsely told them were low-risk, and many were also falsely told that they were investing in FDIC-insured certificates of deposit, government bonds, or corporate bonds issued by companies backed by funds from the Troubled Asset Relief Program (TARP).
Investor funds were also used to engage in risky options futures trading in the stock market in which the Farahis lost more than $18 million in 2008 and the beginning of 2009. The SEC further alleges that most of the money raised was transferred to accounts controlled by the Farahis to fund construction of their multi-million dollar personal residence in Beverly Hills, among other things.
Mimicking Fraudulent Returns
The SEC charged Neil V. Moody and his son, Christopher D. Moody, of Sarasota, Fla., with securities fraud for misleading investors. The father-son pair is alleged to have overstated the returns and value of three hedge funds they managed by as much as $160 million from 2003 to 2009. The SEC alleges the father and son investment team relied exclusively on grossly overstated performance numbers from investment advisor Arthur Nadel. Nadel, founder of Scoop Management Inc. in Sarasota, Florida, was charged last January and indicted in April for securities fraud in connection with six hedge funds he managed by falsely overstating the value of investments in the funds by approximately $300 million.
According to the SEC's complaint, filed in federal court in Tampa, Fla., under an arrangement that the Moodys had with Nadel, he controlled nearly all of the funds' investment and trading activities with no meaningful supervision or oversight by the Moodys. During the six-year period, the Moodys allegedly received about $42 million in management and performance fees from their funds.
