SEC Charges Secured Income Reserve and Former Officers with Fraud
The Securities and Exchange Commission (“SEC”) filed fraud charges against Secured Income Reserve, Inc. and three of its former officers alleging that Income Reserve, Ilona Mandelbaum of Palm Beach Gardens, Fla., David Zimmerman of Boca Raton, Fla., and Matthew Sage of West Palm Beach, Fla. defrauded investors when they raised $1.45 million in offerings of Income Reserve shares.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida, alleges that Income Reserve and Mandelbaum, Income Reserve’s former President and CEO, made material misrepresentations and omitted material facts in Income Reserve’s Private Placement Memorandum (PPM) concerning the use of investor proceeds, the SEC-related disciplinary histories of the former officers, and Zimmerman’s retention and compensation. Mandelbaum, Zimmerman and Sage each previously consented to judgments in SEC cases charging them with securities laws violations. The complaint alleges that Sage, Income Reserve’s former Secretary, Treasurer and COO, aided and abetted Income Reserve’s and Mandelbaum’s misrepresentations and omissions concerning the officers’ backgrounds by drafting that portion of the PPM. The complaint also alleges that Income Reserve and Mandelbaum engaged in a scheme to defraud investors through the misuse of Income Reserve investor proceeds, including by funneling $131,000 of investor proceeds to Mandelbaum’s daughter, Jennifer Austin of Palm Beach Gardens, FL, towards the purchase of a home. The complaint alleges further that Sage aided and abetted Income Reserve’s and Mandelbaum’s misuse of investor proceeds by approving the diversion of Income Reserve investor funds to HSC Holdings, LLC (HSC), an entity controlled by Mandelbaum, and by using investor proceeds to fund the operations of another entity, Sarben Holdings, Inc. The complaint also alleges that Zimmerman, Income Reserve’s former Vice President of Investor Relations, made misrepresentations and omissions to Income Reserve investors regarding the risks of investing in Income Reserve, engaged in a scheme to defraud investors in connection with the sale of approximately $1 million in shares in another company, FilewardenF.com Corp, and that Zimmerman and Tamda Marketing, Inc. (“Tamda”), Zimmerman’s marketing company, acted as unregistered brokers.
The SEC’s complaint alleges that Income Reserve, Mandelbaum and Zimmerman violated the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; that Sage aided and abetted Income Reserve’s and Mandelbaum’s violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; that Zimmerman and Tamda violated Section 15(a) of the Exchange Act; and that Income Reserve and Mandelbaum aided and abetted Zimmerman’s and Tamda’s violations of Section 15(a) of the Exchange Act. The SEC also charged Austin and HSC as relief defendants for the sole purpose of recovering investor funds they were not entitled to receive.
Without admitting or denying the allegations in the complaint, Income Reserve, Mandelbaum, Zimmerman, Sage, and Tamda have agreed to settle the charges against them as follows:
- Income Reserve has agreed to pay $588,243 in disgorgement, $55,233.12 in prejudgment interest, and a $775,000 civil penalty.
- Mandelbaum has agreed to pay $392,752 in disgorgement, $36,877.48 in prejudgment interest, and a $320,000 civil penalty.
- Zimmerman has agreed to pay $148,350 in disgorgement, $9,150.88 in prejudgment interest, and a $320,000 civil penalty.
- Sage has agreed pay a $240,000 civil penalty.
- Tamda has agreed to pay $148,350 in disgorgement, $9,150.88 in prejudgment interest, and a $148,350 civil penalty.
- In addition, among other relief, Income Reserve, Mandelbaum, Zimmerman, Sage and Tamda have agreed to permanent injunctions and Mandelbaum, Zimmerman and Sage have agreed to conduct based injunctions and bars prohibiting them from serving as officers and directors of a public company.
HSC, a relief defendant in the action, consented to settle the charges against it and has agreed to pay $296,100 in disgorgement and $27,802.36 in prejudgment interest.
The settlements, which include provisions that certain defendants and relief defendant HSC are jointly and severally liable for disgorgement and prejudgment interest, are subject to court approval.
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 and compliance 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.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
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Boca Raton, Florida 33432
Telephone: (561) 416-8956
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