Litigation Release No. 24382 / January 25, 2019
U.S. Securities and Exchange Commission v. American Growth Funding II, LLC, et al.,, Civil Action No. 16-cv-00828 (KMW) (S.D.N.Y.)
On January 24, 2019, the Honorable Kimba M. Wood of the United States District Court for the Southern District of New York entered judgments against a Manhattan-based lending company, American Growth Funding II, LLC (“AGF II”), and its owner Ralph C. Johnson, who were charged by the SEC in February 2016 with lying to investors who purchased AGF II’s high-yield securities.
The SEC’s complaint alleged, among other things, that between March 2011 and December 2013, AGF II and Johnson falsely claimed that AGF II’s financial statements were being audited each year. The complaint also alleged that AGF II made misrepresentations in its offering documents about its management and concealed details about deteriorating loan values that could imperil full payment of the promised returns to investors.
Without admitting or denying the allegations in the SEC’s complaint, AGF II and Johnson consented to the entry of judgments permanently enjoining them from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 thereunder of the Securities Exchange Act of 1934. In addition, the judgment against Johnson requires that he pay a penalty in the amount of $75,000 and disgorgement of his ill-gotten gains and prejudgment interest. Under the order, the amount of disgorgement will be decided at a later time, no later than 30 days, either by agreement of the parties or by referral to a magistrate judge. The magistrate judge will calculate disgorgement as $577,731, less amounts paid by AGF Management II, LLC to unaffiliated third parties (which Johnson must prove by documentation), other than for Johnson’s benefit.
The SEC’s action against the non-settling defendants continues.
For further information, see Litigation Release No. 23459 (February 3, 2016).