U.S. Securities and Exchange Commission
Litigation Release No. 18597 / February 25, 2004
SECURITIES AND EXCHANGE COMMISSION SUES DARREN SILVERMAN AND MATTHEW BRENNER IN CONNECTION WITH $33 MILLION SECURITIES FRAUD THAT AFFECTED HUNDREDS OF INVESTORS NATIONWIDE
SECURITIES AND EXCHANGE COMMISSION v. DARREN SILVERMAN AND MATTHEW BRENNER,
Case No. 04-80153-CIV-COHN (S.D. Fla., filed February 19, 2004)
The Securities and Exchange Commission (SEC) announced that on February 19, 2004, it filed a complaint for injunctive and other relief against Darren Silverman (Silverman) and Matthew Brenner (Brenner) to enjoin them from violating the antifraud provisions and the securities registration provisions of the federal securities laws. Silverman and Brenner both reside in Boca Raton, Florida. The SEC alleges that from August 1999 through May 2002, Silverman and Brenner defrauded hundreds of investors out of approximately $33 million through the offer and sale of unregistered securities marketed as purported hedge funds. The hedge funds, IDT Fund A. Ltd., IDT Fund B Ltd., IDT Fund C Ltd., The Millennium IDT Fund Ltd., and IDT Venture (collectively, IDT Funds) were later rolled into IDT Group, Inc. (IDT Group). During the relevant time period, Silverman and/or Brenner were instrumental in operating, managing and supervising IDT Funds and IDT Group.
According to the SEC's Complaint, Silverman and Brenner used deceptive offering materials and fictitious statements, among other things, to entice persons to invest in the hedge funds. The Complaint alleges that they then lulled investors into keeping their funds invested - and making additional investments - by sending account statements falsely stating the IDT Funds were profitable and outperforming major market indicators.
The Complaint also alleges that Silverman and Brenner misrepresented the safety of the investments and lied to investors about the compensation paid to the hedge fund day traders. Further, the Complaint alleges that Silverman and Brenner also misled investors by paying investors what they claimed were "dividends" but, in truth, were new investor funds paid to earlier investors, in a Ponzi-like fashion. Finally, the Complaint alleges that Silverman and Brenner directed both IDT Funds, and its successor IDT Group, to employ unlicensed sales representatives who raised millions of dollars from investors, including more than $3 million from religious non-profit organizations.
As a result, the SEC alleges that Silverman and Brenner violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5, thereunder; and violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. In addition, the Complaint alleges that Silverman and Brenner acted as "control persons" of IDT Funds under section 20(a) of the Exchange Act for its violations of Section 10(b) of the Exchange Act and Rule 10b-5, thereunder. The SEC is also seeking in its lawsuit, among other things, a permanent injunction, disgorgement and civil penalties.
SEC Complaint in this matter
http://www.sec.gov/litigation/litreleases/lr18597.htm