Securities and Exchange Commission

Litigation Release No. 17856 / November 21, 2002

SEC v. Keith Mohn, Mohn Asset Management, L.L.C., Mohn Financial Group, L.L.C., J. Patrick Kisor, PDK International, Inc., Agave, Ltd., Genesis Trading Associates, L.L.C., NCB Investments, Inc., PCM, L.L.C., Jason Malkin, and Gilbert Howard, , Civil Action No. 02-74634 (E.D. Mich., filed Nov. 21, 2002)

The U.S. Securities and Exchange Commission announced that on November 21, 2002, the United States District Court for the Eastern District of Michigan entered an order temporarily enjoining Keith Mohn, Mohn Asset Management, L.L.C., and Genesis Trading Associates, L.L.C. ("Mohn Defendants"), all located in Michigan, from engaging in fraud, unregistered sales of securities, and acting as unregistered brokers, in violation of federal securities laws. The Court also froze the assets of the Mohn Defendants and Defendants Agave, Ltd., J. Patrick Kisor and PDK International, Inc., and required them to produce an accounting of their uses of investors' funds, repatriate investor assets to the United States, and to identify their assets. The Commission's Complaint further seeks orders of preliminary and permanent injunctions and other relief against the Mohn Defendants. The Complaint also seeks permanent injunctions and other relief against Defendants Mohn Financial, Kisor, PDK and Agave, based on their violations of antifraud, securities registration and/or broker-dealer registration provisions of the federal securities laws.

In its Complaint, the Commission alleges that the Defendants engaged in the fraudulent unregistered offer and sale of shares of PDK, Agave, and Genesis. From approximately April 1998 until at least August 2002, Kisor raised approximately $3.7 million for PDK. From approximately September 2000 until at least March 2002, Kisor and Mohn raised approximately $31 million for Agave and Genesis.

The Complaint alleges that Kisor and Mohn recklessly and knowingly made several misrepresentations to investors, including:

• stating that Kisor had engaged in successful options trading and that his low-risk trading strategy had "at least doubled the performance of the S & P 500 for the last five years," when, in fact, his limited trading experience had resulted in losses;
   
• stating that investors' funds would be used to trade options when, in fact, Kisor misappropriated the funds for personal expenditures and made undisclosed investments in illiquid stocks of private companies and penny stocks;
   
• providing false account statements to investors that reflected profitable trading despite their knowledge that the account value information was false.

The Complaint further alleges that, in offering Genesis investments, Mohn:

• falsely represented to investors that the full value of their Agave investments were transferred to Genesis;
   
• did not disclose losses to investors, despite his knowledge of Kisor's misappropriation and loss of investor funds;
   
• mailed Genesis account statements to investors in which he falsely valued their investments; and
   
• used millions of investor funds for an unsecured loan and for risky non-options investments in 2002, without disclosing this information to investors in Agave or Genesis.

The Complaint also names NCB Investments both of, L.L.C., PCM, L.L.C., Jason Malkin and Gilbert Howard as relief defendants and seeks disgorgement and other relief from them, but does not allege that they violated the federal securities laws. The Court entered an asset freeze order against NCB and PCM, which voluntarily consented to the entry of the order. The Court also entered an asset freeze order against Howard. The Court further required each of the relief defendants to produce an accounting of their uses of investor funds and to identify their assets.

The Court's Temporary Restraining Order: (1) temporarily enjoins Mohn and Mohn Asset Management from engaging in securities fraud or the offer or sale of unregistered securities in violation of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(c) of the Securities Exchange Act of 1934 and Rules 10b-5 and 15c1-2 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, and from acting as unregistered brokers in violation of Section 15(a) of the Exchange Act.; and (2) temporarily enjoins Genesis from securities fraud in violation of Sections 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Court has not set a hearing date on the Commission's motion for a preliminary injunction.

SEC Complaint in this matter

http://www.sec.gov/litigation/litreleases/lr17856.htm