The U.S. Securities and Exchange Commission (SEC) charged New Jersey resident Kenneth Thom with defrauding investors in connection with an offering fraud through which he allegedly raised over $600,000 from more than fifty investors. Thom was associated with five different brokerage firms before the Financial Industry Regulatory Authority (“FINRA”) suspended Thom’s registration as a broker, after he failed to pay damages awarded in a FINRA arbitration.
The SEC complaint, filed in U.S. District Court for the Southern District of New York, charges Thom with violating certain provisions of the antifraud provisions of the federal securities laws, namely: Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 206 of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder.
The SEC’s complaint alleges Thom, who used the monikers “K Money” and “K$” online, portrayed himself as a trading “luminary”, a “former Wall Street market maker” and a “beacon of knowledge, who had enjoyed an ‘illustrious career’ guiding and shaping the destinies of the world’s most elite traders.” Thom’s actual experience in the securities industry was limited, per the SEC.
Thom solicited investors via a Facebook group that he ran, inviting them to send him funds that he represented would be pooled in one or more shared accounts (the “Shared Account”) and traded on their behalf. Based on Thom’s representations, investors understood that any profits would be shared, with Thom taking 50% of the profit and the investors sharing the other 50% on a pro rata basis.
As alleged in the Commission’s enforcement action, Thom fraudulently raised over $600,000 from more than fifty investors. He pooled investor funds in a bank account he controlled, transferred a portion of the funds into brokerage accounts, and traded those funds (without much success), primarily in equity options. He also misappropriated approximately $235,000 of investor funds, either by transferring money to other bank accounts he controlled or simply using it for personal expenses, including tens of thousands of dollars on expenses such as luxury goods in Tokyo, an Airbnb rental in Paris, and everyday items like gas, New York City subway fare, and groceries. In addition to making material misrepresentations about the use of investor funds while soliciting such funds, Thom lied about his trading performance in the so-called Shared Account the SEC contends in its court filing.
The SEC seeks permanent injunctive relief including conduct-based injunctions, disgorgement of all ill-gotten gains and prejudgment interest, and a civil penalty in its lawsuit. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York (USAO) announced criminal charges against Thom.
Securities Offering Fraud Lawyer
David Chase, of the Law Firm of David R. Chase, is an often-quoted and nationally known SEC securities fraud defense lawyer who has successfully represented individuals in SEC investigations around the nation for more than 25 years, having previously served in the SEC’s Division of Enforcement as a Senior Counsel. If you are under SEC investigation for misusing investor funds and require experienced and knowledgeable counsel to protect you through the investigatory process, contact David at: 800-760-0912 or e-mail him at: david@davidchaselaw.com for a free, confidential consultation. Visit the Firm’s website to read about David’s SEC defense experience and the firm’s recent successful results for its clients at: www.securitiesfrauddefense.net.
