Attorney Jilbert Tahmazian Charged with Fraud in a Prime Bank Scheme
On February 11, 2016 the Securities and Exchange Commission (SEC) charged Jilbert Tahmazian, a lawyer licensed in the state of California, with fraud for engaging in a prime bank scheme.
Prime bank schemes involve the offer and sale of fictitious investment programs claiming that investors’ funds will be used to purchase and trade “prime bank” financial instruments on clandestine overseas markets to generate huge returns in which the investor will share. However, neither these instruments, nor the markets on which they allegedly trade, exist.
The SEC alleges that Tahmazian and his co-schemer offered and sold bogus investment contracts purporting to provide investors access to “a Financial Instrument issued by a top rated financial institution/top 50 bank with a minimum face value of $100 million” and “designated toward a 40-week private placement program.” However, no such “financial instrument” or “private placement program” existed. Nonetheless, under the purported terms of the fraudulent investment contracts, investors were promised that they would receive a return of 15% to 30% per week from their investment or, if their money was not invested within 15 or 30 days, their funds, plus a 2% penalty, would be returned. Tahmazian and his co-schemer obtained approximately $6 million from at least four investors, who purchased these fraudulent investment contracts.
The SEC’s Complaint claims that Tahmazian was an integral and knowing participant in the fraud. Among other things, investors were directed to deposit their money in Tahmazian’s attorney-client trust account. However, the investors’ funds were never applied toward any investment. Instead, after retaining a substantial “fee” for himself, Tahmazian transferred the investors’ remaining money from his attorney-client trust account to his co-schemer, who in turn misappropriated the investors’ money for their personal use, including lavish spending at Las Vegas casinos and high-end retail stores. The victims of the scheme lost their entire investments, with the exception of one investor who received a partial refund from Tahmazian of $100,000 from another investor’s money that was being held in Tahmazian’s attorney-client trust account.
In 2011, one of the victims of the scheme sued Tahmazian in California state court. The trial court found that Tahmazian and his co-schemer had perpetrated a “very sophisticated and financially successful fraud” and that Tahmazian’s participation, as a licensed attorney, was “highly instrumental” to soliciting investors by adding an air of legitimacy to the scheme. The court ultimately found that Tahmazian was “a knowing participant in the fraud,” adjudged him liable on multiple claims, and ordered him to pay back all of the investor’s money – nearly $1.2 million. The judgment against Tahmazian was subsequently affirmed on appeal.
The SEC’s complaint charges Tahmazian with violations of Section 10(b) of the Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder, Sections 5(a) and (c) of the Securities Act of 1933 and Sections 17(a)(1) and (3) of the Securities Act.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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