SEC v. THE NIR GROUP, LLC; COREY RIBOTSKY; and DARYL DWORKIN, Eastern District of New York (Sept. 28, 2011) — Complaint

GEORGE S. CANELLOS 
, ,
Regional Director 
I . 
-'::'..:.../
Attorney 
for the Plaintiff 

SECURITIES AND EXCHANGE 
COMMISSION 

New York Regional Office BROOK 

3 World Financial Center -  Suite 400 lYN OFFICI! 

New York, New York 10281 

(212) 336-0589 
(Howard A. Fischer, Senior Trial Counsel) 

Email: [email protected] 

UNITED STATES 
DISTRICT COURT 

EASTERN DISTRICT OF NEW YORK 

BIANCO, J. 
------------------------------------------------------------------------J( 

SECURITIES AND EXCHANGE COMMISSION, 
BOYLI:. M.Je 

11 Civ. _____ 
Plaintiff, 
COMPLAINT 
-
against-
ECF Case 
THE NIR GROUP, LLC; COREY RIBOTSKY; 
and DARYL DWORKIN, 
Jury Trial Demand 
Defendants. 
------------------------------------------------------------------------J( 
Plaintiff Securities and Exchange Commission ("Commission"), for its complaint against 
defendants The NIR Group, LLC ("NIR"), Corey Ribotsky ("Ribotsky"), and Daryl Dworkin 
("Dworkin") (collectively, "Defendants"), alleges: 
SUMMARY 
1. This action involves the misconduct ofan unregistered investment adviser who (i) 
misappropriated over 
$1 million ofclient assets and (ii) made materially false and misleading 
statements 
to investors in an attempt to conceal the poor performance ofhis investment and 
trading strategy during the recent financial crisis. From at least 2004 to 2009, Ribotsky, 
operating through his Long Island, New York unregistered investment advisory firm, NIR, 

defrauded investors in the $876 million AJW family ofhedge funds ("AJW Funds"), which 
invest in PIPE transactions (private investment in public equity). 
2. From July 2004 to June 2009, Ribotsky misappropriated for his personal use over 
$1 million ofassets from one ofthe AJW Funds he was managing through NIR -  the AJW 
Qualified Partners, LLC Fund ("AJW Qualified Fund"). Ribotsky liquidated some 
of AJW 
Qualified Fund's assets and misused the proceeds by writing checks to pay for personal services 
and 
to purchase luxury items, including cars and expensive jewelry. Ribotsky also wrote checks 
to himself or to "cash" and then instructed NIR office employees to cash the checks at a nearby 
bank and give Ribotsky the money. Although Ribotsky was warned by NIR's head accountant 
that he could not lawfully take this money for himself, Ribotsky continued to 
do so. 
3. In addition to misappropriating client assets, Ribotsky made false and misleading 
statements to investors in 2007,2008 and 2009 about the AJW Funds' performance and liquidity. 
In particular, Ribotsky falsely told investors that, despite the adverse market conditions 
ofthat 
time, NIR could liquidate -  that is, fully convert to cash -  all ofthe AJW Funds' PIPE 
investments in 36 to 48 months. This,howevet, was a practical impossibility under the 
investment and trading strategy that NIR touted, given the size 
ofthe AJW Funds' PIPE 
investments and the adverse market conditions at the time. 
4. Ribotsky made these false and misleading statements even after the AJW Funds' 
outside auditor met with him 
to disc:usst.heresuhs oftheir audit procedures, in which the auditor 
calculated that it would take decades, 
if ever, to liquidate all ofthe AJW Funds' PIPE 
investments under NIR's stated investment and trading strategy. This was due, in part, to the 
fact that by January 2008, NIR had acquired, in many instances, the contractual right to billions 
of shares of stock in non-performing, distressed companies that were quoted at mere fractions of 
2 


a penny mostly on the Pink Sheets (now OTe Link), a private electronic inter-dealer quotation 
and trading system used in the over-the-counter market. These issuers had very little, 
if any, 
trading volume in relation to the billions 
ofshares that the AJW Funds were contractually 
entitled to receive. 
5. Furthermore, in November and December 2008, Ribotsky purported to sell $43.2 
million 
ofthe AJW Funds' assets to a third-party (the "Purchaser") in an apparent effort to show 
investors that NIR was continuing to generate cash (or realized gains) in the fourth quarter 
of 
2008. The Purchaser, however, did not pay cash for the AJW Funds' assets; rather, he signed 
"promissory notes" agreeing to pay the full $43.2 million purchase price in cash within 3-6 
months. The Purchaser defaulted on the promissory notes and never paid for the assets, yet he 
continues to own and control the assets and has not returned them to the AJW Funds. 
6. Ribotsky and NIR defrauded investors by failing to conduct any due diiigence on 
the Purchaser or his entities before committing the AJW Funds to the transaction. Ribotsky and 
NIR failed to conduct any due diligence despite the fact that NIR's offering materials and 
investor communications touted that NIR engages in extensive due diligence reviews before 
making investment decisions 
on behalfofthe AJW Funds. Had Ribotsky conducted any 
meaningful due diligence, as 
he had told investors he would do, Ribotsky would have learned 
that entering into a multi-million dollar transaction with the Purchaser and his entities was not in 
the best interests 
ofthe AJW Funds becausethePurchaserand-pis-entities were not creditworthy 
counter-parties. For example, they had no meaningful assets or money to pay for the assets they 
were acquiring from the AJW Funds and they had a number 
of unpaid debts, judgments and liens 
against them. 
3 


7. Ribotsky further defrauded investors by instructing Dworkin, an NIR employee, 
to mislead investors by, among other things, falsifying certain documents that were sent to 
investors. In particular, in August 2007, Dworkin prepared an investor chart accurately showing 
that 
NIR had invested a total of $31.4 million in 57 deals for the relevant period. After Ribotsky 
reviewed the chart, he told Dworkin that "investors 
can't see this" and he instructed Dworkin to 
"change the number to something near $60 million" before sending it to investors, apparently 
because Ribotsky wanted investors to see an average investment 
ofat least $1 million per deal. 
Dworkin followed Ribotsky's instructions and changed the figure to $58.6 million on the chart. 
The falsified chart was subsequently sent to investors. 
8. Ribotsky also defrauded investors by using money from one group of investors to 
pay another group 
of investors without adequately disclosing this to any of the investors. In May 
2007, Ribotsky told investors in an AJW off-shore fund and an AJW on-shore fund that 
NIR was 
merging the two funds to create an AJW "master fund." Ribotsky, however, did not disclose to 
the investors that the reason he was merging the two funds was to gain access to the cash in the 
off-shore fund to pay outstanding investor redemptions in the on-shore fund. At the time, the on­
shore fund lacked sufficient cash, 
or the ability to generate sufficient cash, to pay all ofthe 
outstanding investor redemptions. 
VIOLATIONS OF THE FEDERAL SECURITIES LAWS 
9. By virtue ofthe conduct alleged in this complaint, Ribotsky and NIR, directly or 
indirectly, singly or in concert, have engaged in and are engaged in transactions, acts, practices, 
or courses 
ofbusiness that constitute violations of Section 17(a) ofthe Securities Act of 1933 
("Securities Act") 
[15 U.S.C. §§ 77q(a)], Section lOeb) ofthe Securities Exchange Act of 1934 
("Exchange Act") 
[15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.lOb-5] thereunder, and 
4 


Sections 206(1), 206(2), 206(4) ofthe Investment Advisers Act of 1940 ("Advisers Act") [15 
U.S.C. §§ 80b-6(1), (2) and (4)] and Rule 206(4)-8 thereunder [17 C.F.R. § 275.206(4)-8]. 
10. By virtue 
ofthe conduct alleged herein, Dworkin is liable (a) pursuant to Section 
20(e) 
ofthe Securities Exchange Act of 1934 (the "Exchange Act") [15 U.S.C. § 78t(e)], for 
aiding and abetting 
NIR's and Ribotsky's violations ofSection lOeb) of the Exchange Act [15 
U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]; and (b) pursuant to Section 
209(d) 
ofthe Investment Advisers Act ("Advisers Act") [15 U.S.C. § 80b-9(e)], for aiding and 
abetting 
NIR's and Ribotsky's violations of Section 206(4) ofthe Advisers Act [15 U.S.C. § 
80b-6(4)] and Rule 206(4)-8 thereunder [17 C.F.R. § 275.206(4)-8]. 
NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT 
11. The Commission brings this action pursuant to the authority conferred upon it by 
Section 20(b) 
ofthe Securities Act [15 U.S.C. § 77t(b)], Section 21(d)(1) ofthe Exchange Act 
[15 U.S.C. § 78u(d)(1)], and Section 209 
ofthe Advisers Act [15 U.S.C.§80b-9]. 
12. The Commission seeks a 
judgment (a) permanently enjoining Defendants from 
committing future violations 
ofthe above provisions ofthe federal securities laws; (b) ordering 
Defendants to disgorge any ill-gotten gains with prejUdgment interest thereon; (c) ordering 
Defendants 
to pay civil money penalties pursuant to Section 20(d) ofthe Securities Act [15 
U.S.C. § 77t(d)], Section 
21 (d)(3) ofthe Exchange Act [15 U.S.C. § 78u(d)(3)], and Section 209 
ofthe Advisers Act [15 U.S;C §80b-9J; and (d) ordering such other arId further relief the Court 
may deem just and proper. 
JURISDICTION AND VENUE 
13. This Court has jurisdiction over this action and venue is proper in the Eastern 
District 
ofNew York pursuant to Sections20(b) and 22(a) ofthe Securities Act [15 U.S.c. §§ 
5 


77t(b) and 77v(a)], Sections 21(d) and 27 ofthe Exchange Act [15 U.S.C. §§ 78u(d) and 78aa], 
and Sections 209 and 214 
ofthe Advisers Act [15 U.S.c. §§ 80b-9 and 80b-14]. The 
Defendants, directly and indirectly, have made use 
ofthe means and instrumentalities of 
interstate commerce, or ofthe mails, in connection with the transactions, acts, practices and 
courses 
of businesses alleged herein. A substantial portion ofthe events comprising Defendants' 
fraudulent conduct occurred 
in the Eastern District ofNew York. NIR maintains its principal 
place 
ofbusiness and offices in this District; Ribotsky and Dworkin reside in this District; and 
several investors in the 
AJW Funds reside in this District. Furthermore, Ribotsky 
misappropriated client assets in this District and made material misrepresentations and omitted to 
state material facts when communicating with investors and potential investors while working 
out 
ofNIR's offices in'this District. 
DEFENDANTS 
14. NIR is an unregistered investment adviser located in Roslyn, New York. NIR 
was organized as a limited liability company in November 1999 and is controlled by Ribotsky, 
who is the firm's sole managing member. For a 
briefperiod in 2006, NIR was registered with 
the Commission as an investment adviser, but 
NIR withdrew its investment adviser registration· 
just a few months after registering with the Commission. At all times relevant to the allegations 
in the complaint, 
NIR provided investment advisory and management services to the AJW Funds 
through various wholly-owned affiliated entities that serve as managing members 
ofthe 
individual funds. 
15. 
Ribotsky, age 40, resides in Old Westbury, New York. Ribotsky is the sole 
managing member 
ofNIR and controls all ofthe operations and activities ofNIR. Ribotsky does 
6 


not hold any securities licenses. Ribotsky attended Brooklyn Law School and NYU Business 
School for a period 
oftime, but he did not graduate or receive a degree from either institution. 
16. Dworkin, age 42, resides in Syosset, New York. Dworkin was an NIR analyst 
from September 2002 through March 2003. He later returned to work at NIR as an analyst from 
April 2004 through April 2008. 
On July 7, 2010, Dworkin pled guilty in U.S. v. Daryl Dworkin 
CR1 0-515 (EDNY) to criminal charges, including conspiracy to commit securities fraud, arising 
out 
ofhis role in the conduct alleged in this Complaint. 
FACTS 
General Background 
The AJW Funds 
17. The AJW Funds are a group ofprivate investment funds that invest in PIPE 
transactions.  The AJW Funds were formed in 1999 and were managed by Ribotsky through NIR 
and its affiliate entities. According to the AJW Funds' audited financial statements for the 
period 2000 to 2007, the AJW Funds' assets increased from approximately $17 million in 2000 
to approximately $876 million in 2007. The last audited financial statements for the AJW Funds 
are for year-end December 31, 2007. The AJW Funds' independent auditor has not issued an 
audit report with respect to the 
AJW Funds' 2008,2009, and 2010 year-end financial statements, 
and NIR has not sent investors any audited financial statements for those years. 
18. The 
AJW Fu.'lds were originally comprised 
ofAJW Partners, LLC, New 
Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, and AJW Offshore, Ltd. 
19. In June 2007, Ribotsky combined AJW Qualified Partners LLC (an on-shore 
fund) and 
AJW Offshore, Ltd. (an off-shore fund) to form a master/feeder fund named the AJW 
Master Fund, Ltd. ("Master Fund"). 
7 


20. In October 2008, Ribotsky suspended all investor redemption payments and 
formed a new set 
of AJW funds. The new funds required investors to agree to longer lock-up 
periods for redemptions in exchange for lower management and performance fees. The new 
funds are New Millennium Capital Partners III, LLC, AJW Partners II, LLC, AJW Qualified 
Partners II, LLC, AJW Offshore II, Ltd. and AJW Master Fund II, Ltd. 
In forming the new 
funds, which employed the same PIPE investment strategy, NIR effectively transferred a portion 
ofthe existing AJW fund's assets to the new AJW funds. NIR sent existing investors new 
offering documents and subscription agreements for the new AJW funds. Existing investors 
were asked to choose whether they wanted to remain in the existing AJW funds or transfer their 
investments into the new AJW funds. Most investors elected to transfer their investments into 
the new AJW funds. 
21. On March 30 and 31, 2011, 
NIR informed investors in the AJW Funds that NIR 
was going to unwind and liquidate the 
AJW Funds. On April 5, 2011, the Grand Court of the 
Cayman Islands ("Grand Court") placed the voluntary liquidation 
of the off-shore Master Fund 
(which accounts for approximately 70% 
ofall ofthe AJW Funds' assets) under the Grand 
Court's supervision. On May 30, 2011, the Grand Court appointed an independent third-party 
liquidator for the Master Fund. 
NIR's PIPE Investment and Trading Strategy 
22. Ribotsky, acting through NIR a..'1d its affiliated entities, provides investment 
advisory and management services to the AJW Funds. The AJW Funds were typically invested 
in 120-130 different companies at any given time. Ribotsky touted the PIPE strategy in investor 
publications as 
NIR's "own unique proprietary investment strategy and investment process." 
The AJW Funds provided cash financing to micro-cap distressed, emerging-growth, and start-up 
8 


companies quoted on the Over-the-Counter Bulletin Board ("OTC-BB") or the Pink Sheets. 

Most 
of the companies in which NIR invested the AJW Funds' money trade for pennies per 

. . . 
share, or for fractions ofa penny, in very thinly traded markets. Some of the companies do not 
trade at all. NIR purportedly provided the companies financing in "tranches" that it claimed 
extended over 2-4 years. 
23. The AJW Funds typically received convertible debentures that paid an annual 
interest rate 
of4% to 12% and had a default penalty of 15% that applied to unpaid principal and 
interest at the time 
ofmaturity. The outstanding principal and interest under the debentures were 
purportedly convertible into the borrower's common stock at a discount (ranging from 35% to 
85%) to the stock's market price at the time 
of conversion. Because the contractual terms ofthe 
financing provided that the debt would always be converted at a discount to the share's market 
prices at the time 
ofconversion, NIR recorded a "paper profit" (as unrealized gains) when the 
PIPE deals closed, and 
NIR accreted the unrealized gains over a 90 day period. 
·24. NIR sought to convert the paper profits (unrealized gains) to cash income 
(realized gains) by selling the discounted shares in the open market. The "convert and sell" 
trading aspect 
ofNIR's investment strategy allowed it to record the cash income received from 
selling stock in the open market as realized gains on the AJW Funds' books and records and 
financial statements. 
25. Ribotsky represented to investors that NIR could 
"liquidate" or "exit" alLofthe 
AJW Fund's PIPE investments (i.e., fully convert the debentures to stock and sell the stock) 
within 36 to 48 months. 
9 


NIR's Performance History And Management Fees 
26. According to the AJW Funds' audited financial statements for the years ending 
2000 to 2007, NIR recorded a total 
of $407 million in returns during that period. Most ofthe 
returns, however, were from NIR's write-up each year 
ofthe purported fair value of the PIPE 
investments in the AJW Funds' portfolio and not from realized trading profits from converting 
the loans to stock and selling the stock in the market. 
27. NIR earned management fees equal to 2% 
ofthe AJW Funds' assets and 
performance fees equal to 20% 
ofthe AJW Funds' supposed annual profits, which consisted of 
realized and unrealized gains. According to the AJW Funds' audited financial statements, NIR 
earned approximately $126 million in management and performance fees during the period 2000 
through 2007. 
Of this amount, approximately $37 million was from management fees and 
approximately $89 million was from performance fees. 
28. As discussed above, the AJW Funds' independent auditor has not issued an audit 
report with respect to the AJW Funds' 2008,2009, and 2010 year-end financial statements, and 
NIR has not sent investors audited financial statements for those years. 
Failure of NIR's Investment and Trading Strategy 
29. By mid to late 2007, 
NIR's strategy of investing in distressed and start-up 
companies began to show signs offailure. Many 
ofthe distressed companies that the AJW 
Flli'1ds had made loans to were by then essentially defunct or on the verge of filing for 
bankruptcy. They were no longer engaging in any meaningful business operations, had "going 
concern" reports from auditors, were delinquent in their periodic and other filings,and were 
trading, 
if at all, primarily on the Pink Sheets for mere fractions of a penny. Accordingly, the 
10 


companies that the AJW Funds had loaned money to in prior years were now defaulting on their 
loan and conversion obligations in 2007. 
30. In order to avoid the possibility that NIR would need to write-down the fair value 
ofthe AJW Funds' investments in delinquent and non-performing companies, Ribotsky chose to 
"restructure" the outstanding debt by issuing new debentures to the same delinquent and non­
performing companies. Ribotsky rolled the outstanding principal, interest, and default penalties 
into new debentures and negotiated greater conversion discounts for the issuers' shares. 
Although this restructuring strategy contractually entitled the AJW Funds to a greater number 
of 
shares, for most of the companies, there was little, if any, trading volume for their stock by late 
2007. By restructuring the loans 
in this manner, NIR ended up recording more and more 
unrealized gains for the investments and avoided having to disclose to investors what otherwise 
would have been an ever-growing number 
ofdefaulted loans held by the AJW Funds. 
31. The practical effect 
ofthe debt restructurings, however, was that it would be 
difficult or impossible for NIR fully to "monetize" these PIPE investments -  that is, fully convert 
the unrealized gains to realized gains -  because there was insufficient trading volume to sell the 
billions 
ofshares that the AJW Funds were now contractually entitled to under the terms ofthe 
restructured debentures. 
32. Despite the fact that by 
2007 it was unlikely that NIR could ever fully convert and 
liquidate most 
ofthe PIPE investments, NIR was still reporting double digit performance returns 
for the AJW Funds. Ribotsky and NIR were able to do so by restructuring bad debt, which 
resulted in the recording 
ofmore and more unrealized gains. NIR continued to earn management 
and performance fees that were calculated, in part, by reference to the period-over-period 
increase in unrealized gains for the AJW Funds' 
now illiquid PIPE investment portfolio. For 
11 


example, during the first six months of2008, NIR earned approximately $7.5 million in 
management fees. 
The Funds' Independent Auditor Tells Ribotsky It Will Take 

Decades, if Ever, to Liquidate the Funds' PIPE Investments 

Under NIR's Stated Investment and Trading Strategy 

33. In connection with the audit ofthe AJW Funds' 2007 year-end financial 
statements, the AJW Funds' independent auditor (the "Auditor") analyzed the amount 
of time it 
would take NIR 
to liquidate the PIPE investments under NIR's stated investment and trading 
strategy. Based on several different audit procedures that the Auditor performed in early 2008, 
the Auditor calculated that it would take NIR decades, 
if ever, to liquidate the AJW Funds' PIPE 
investments. The Auditor met with Ribotsky several times over the course 
ofJanuary, February 
and May 2008 to discuss the results 
oftheir analyses and provided him with their audit work 
papers detailing their analyses. 
34. 
One 
ofthe audit procedures that the Auditor conducted was an "aging analysis" of 
the AJW Funds' PIPE investment portfolio. This analysis concluded that it would take NIR 25 
years to liquidate just one-half ofthe PIPE investment portfolio and an unspecified amount of 
time beyond 25 years to liquidate the remaining half. In fact, the Auditor's work papers note that 
that actual number of years it would take to liquidate the PIPE investments was even greater 
because the aging analysis assumed that 
NIR was the only party selling stock in the thinly traded 
markets for these securities, 'wpich would not be the case. The aging analysis was based 
on 2007 
market conditions, including the companies' share price 
on December 31,2007 and the average 
daily trading volume over a six month period leading up to that date. 
35. In another analysis, called a "turnover analysis," the Auditor calculated that it 
would take NIR approximately 
11 years to liquidate the entire PIPE investment portfolio. This 
12 


analysis was based on NIR's 2007 rate ofturnover for the PIPE investment portfolio. The 
Auditor calculated that NIR liquidated approximately 9% 
ofthe PIPE investment portfolio in 

2007 and, at that rate, it would take approximately 
11 years to liquidate the entire PIPE 

investment portfolio. 

36. The Auditor also performed an analysis 
ofthe AJW Funds' top 25 PIPE 
investments to determine how long it would take NIR to liquidate these investments, which 
accounted for 62% 
ofthe total value of the AJW Funds' PIPE investment portfolio. The Auditor 
calculated that, as 
of December 31,2007, only 3 out ofthe 25 investments could be liquidated in 
4 years or less. The Auditor calculated that it would take tens and, in some cases, hundreds 
of 
years to liquidate most of the PIPE investments under NIR's stated investment and trading 
strategy. In fact, the Auditor calculated that 2 PIPE investments would take over 700 years to 
liquidate and that 3 PIPE investments were in companies that had no trading activity at all for 
their common stock. This meant that it was unlikely that these PIPE investments could ever be 
liquidated in the open market. 
37. For example, one 
of the AJW Funds' largest PIPE investments was a $6.8 million 
principal investment in a company called Modem Technologies ("MODC"), which was a Pink 
Sheet stock that had been delisted from the OTC-BB on October 
25,2006 for failing to file 
required financial reports. The Auditor's analysis revealed that, as 
ofDecember 31,2007, NIR 
was carrying this inv€stment on the AJW Funds' books at a discounted fair value of$16.8 
million, which was based 
on the AJW Funds' contractual right to convert the· outstanding loan 
amount into 27 billion shares 
ofMODC stock, which was quoted for $0.001. per share on the 
Pink Sheets as ofDecember 31, 2007. Based on the six month average daily trading volume, 
which was 
just 145,295 shares per day, the Auditor calculated that it would take NIR 
13 

approximately 751 years to fully convert and sell out of this investment in order to liquidate 
(i.e., fully convert to cash) under 
NIR's stated investment and trading strategy. 
38. The following is a summary 
ofthe Auditor's calculations for the number ofyears 
it would take NIR to liquidate the AJW Funds' Top 25 PIPE investment under NIR's stated 
investment and trading strategy: 
AJW Funds 
Top 25 
12/3112007 
Company Total Shares 
(Convertible) 
Price Per Share 
Est. Years to 
Fully 
Convert/Sell 
MHGI 
188,133,397,544 $0.00019 
95 
TXTG 4,716,667 $0.75 
20 
DLAV 12,206,262,745 $0.00388 
4 
EPCG 133,626,458,246 $0.00019 
137 
CCNG 233,423,636,923 $0.00013 
711 
MODC 27,165,483,400 $0.001 
751 
CYBL 
853,979,379 
$0.0255 0 
ACTK Not Traded Not Traded 
Not Traded 
CYDF 
3,419,062,087 $0.00631 
8 
WTVN 25,886,054,761 $0.00113 
27 
GLBT 
194,157,196,923 
$0.00013 
43 
GRWW 3,060,022,063 $0.007 
32 
PFEH 50,004,640,632 $0.00038 96 
CYSG 133,357,891,154 $0.00013 
140 
MGWL Not Traded Not Traded 
Not Traded 
DIBZ Not Traded Not Traded 
Not Traded 
ASVN 57,297,025,161 $0.00031 
12 
AVTI 4,175,406,116 
$0.00419 8 
SSHS 24,153,329 $0.30 99 
BNYN 10,424,152,107 $0.00138 
10 
ABPH 3,354,056,010 
$0.004 20 
INSN 103,916,252,747 $0.00013 
41 
IGAI 24,337,922,632 $0.00038 
31 
ITRO 4,741,356,611 $0.00263 
1 
ADMH 4,108,354,114 $0.003 8 
14 


The Fraudulent Conduct 
Misappropriation 
of Fund Assets 
39. Sometime after forming the AJW Funds in 1999 and 2000, Ribotsky and a 
business partner decided to set up a private company to make personal PIPE investments for 
themselves. They formed a private investment vehicle called Equilibrium Equity, LLC 
("Equilibrium") which made the same type 
of PIPE investments that the AJW Funds were 
making. That is, they made loans to micro-cap companies in exchange for debentures that 
allowed the loans to be converted into the issuers' stock. Sometime after forming Equilibrium, 
Ribotsky bought out his partner. Ribotsky then became the sole member 
ofEquilibrium and, 
therefore, the sole owner 
ofthe convertible debentures that constituted Equilibrium's sole assets. 
40. In July 2004, Ribotsky decided to personally invest in one 
ofthe funds he was 
managing -  the AJW Qualified Fund. However, instead 
of investing in the fund by making a 
payment to the AJW Qualified Fund, Ribotsky chose to make an "in-kind" investment by 
assigning and transferring to the AJW Qualified Fund all 
ofthe assets (convertible debentures) 
that Ribotsky owned through his private company, Equilibrium. Ribotsky transferred all 
of 
Equilibrium'S debentures, which he valued at $581,525, to the AJW Qualified Fund in July 2004. 
At that point, Ribotsky became an investor in the AJW Qualified Fund under the same terms and 
conditions as the other investors in the fund and he relinquished all 
of his direct ownership 
interest in the debentures which he previously 
oVffi€d through Equilibriu.TJ1. 
41. Almost immediately after making his personal investment in the AJW Qualified 
Fund, Ribotsky began to misappropriate assets from that fund for his personal use. From August 
2004 through June 2009, Ribotsky converted the debentures that he had transferred from 
Equilibrium to the AJW Qualified Fund into the issuers' common stock. Ribotsky then arranged 
15 


to have the stock delivered to an Equilibrium brokerage account instead of an AJW Qualified 
Fund brokerage account. Ribotsky then sold the stock in the open market and transferred the 
cash proceeds to an Equilibrium bank account instead 
ofan AJW Qualified Fund bank account. 
In total, between August 2004 and June 2009, Ribotsky generated approximately $1,060,000 in 
cash proceeds in the Equilibrium brokerage and bank accounts by converting debentures and 
selling stock that belonged to the AJW Qualified Fund. Ribotsky misappropriated nearly all 
of 
this money for his personal use, as described below. 
42. Between June 2006 and April 2008, Ribotsky withdrew $155,500 in cash from 
Equilibrium'S bank account by writing checks to himself 
or to cash. Ribotsky instructed office 
employees to take the checks to a local bank, cash them, and give him the money. 
In addition, 
between August 2004 and March 2008, Ribotsky misappropriated additional money from the 
sale 
of stock that belonged to the AJW Qualified Fund and its investors as follows: (i) writing 
checks totaling $24,681 for Lexus and Mercedes car payments; (ii) writing a check to a jewelry 
store for 
$15,750 to purchase a Rolex watch; (iii) withdrawing $19,000 in cash from ATM 
machines; (iv) spending $23,000 for audio and computer services for his home residence; and 
(v) transferring
nearly $815,000 to various personal bank accounts or accounts under his control 
that were not accounts that belonged to AJW Qualified Fund. 
43. At some point in 
2004, NIR's head accountant told Ribotsky that Ribotsky could 
---not take for himself the money in the Equilibrium accounts that came from the conversion of 
debentures and the sale ofstock that belonged to the AJW Qualified Fund and its investors. 
Ribotsky told the head accountant "not to worry about it" and he continued to take the money for 
himself. 
16 


False and Misleading Statements and Omissions of Material Fact 
Time Required to Liquidate the AJW Funds' PIPE Investments 
44. 	In 2007 and 2008, Ribotsky told investors and prospective investors that NIR 
could "liquidate" 
or "exit" all ofthe AJW Funds' PIPE investments in 36 to 48 months. 
Ribotsky continued to tell this to investors even after the Auditor showed Ribotsky their analyses 
calculating that it would take NIR decades, 
if ever, to liquidate all ofthe AJW Funds' PIPE 
investments under 
NIR's stated investment and trading strategy. 
45. .  Specifically, Ribotsky made the following false and misleading statements to 
investors: 
(a) 	October 21,2008 email from Ribotsky to investor 
Investor: "How much in proceeds could you realistically have raised if 
you had to convert as much as you could and tried to sell the converted 
shares?" 
Ribotsky: "[W]e could if needed sell the entire portfolio in 36 months 
getting the current N A V. 
If we were to want to fire sale it, the time would 
be less, but we may not get the exact discounted market value we carry the 
investments 
at." 
(b) 	March 30, 2008 email from Ribotsky to investor, attaching Due 
Diligence 
Ouestionnaire signed by Ribotsky 
Q: 	Describe your strategy (in as much detail as possible): 
A: N.I.R. specializes in private placements in public small 
capitalization companies 
... PIPE's are structured as convertible preferred 
securities, or secured convertible debt that converts to common stock, Full 
Liquidation could take from 1 to 4 
or more years. 
(c) 	July 17,2008 email from Ribotsky to investor 
Ribotsky: "Vie usually look at the total sale ofthe whole portfolio if we 
were going to sell it all in approximately 36 to 48 months." 
(d) 	October 16, 2008 letter signed by Ribotsky to investors 
Ribotsky: "[I]t is generally expected to take approximately 36 months or 
longer to successfully sell the securities 
ofall ofthe portfolio companies 
held by the [AJW Funds]." 
17 


(e) 	October 1, 2007 email from Ribotsky to investor 
Investor: "How liquid is  your portfolio? How fast can you liquidate 50%, 
75% and 100%?" 
Ribotsky: "As you know unlike most we always have 15-25% in cash at 
all times 
... [and] [t]o liquidate the remaining 75% in total in a complete 
liquidation 
of the fund we would say approximately 36 months." . 
46. Ribotsky's statements above representing the length 
oftime it would take NIR to 
liquidate the AJW Funds' portfolio 
of PIPE investments were materially false and misleading in 
light 
ofthe market conditions at the time. The statements were false because by late 2007 most 
of the AJW Funds' PIPE investments were convertible into billions of shares of stock in 
companies that traded for mere fractions 
ofa penny and had little, if any, trading volume in 
relation to the billions 
of shares that the AJW Funds were contractually entitled to receive. 
Therefore, it would take decades, 
if ever, for NIR to convert and sell the stock in those 
companies in order to liquidate 
the AJW Funds' PIPE investments under NIR's stated 
investment and trading strategy. 
47. In fact, as 
of December 31, 2007, at least seven companies in which the AJW 
Funds had invest(!d did not trade at all and, therefore, there was no trading market for 
NIR to sell 
the stock 
ofthese companies. The Auditor met with Ribotsky in early 2008, and showed him 
their analyses calculating that the length 
oftime if would take NIR to liquidate the AJW Funds' 
PIPE investments under 
NIR's stated investment and trading strategy was nowhere close to the 
36 to 48 month period Ribotsky was telling investors. Therefore, Ribotsky knew, or was at least 
reckless in not knowing, that his statements to investors about the length 
of time it would take 
NIR to liquidate the PIPE investments were false and misleading at the time he made them. 
48. Ribotky's statements were also misleading because Ribotsky omitted material 
information when making the statements to investors. In order to make Ribotsky's statements to 
investors not misleading, Ribotsky should have told investors, at a minimum, that the 36 to 48 
18 


month exit period he was representing was not possible under the market conditions existing in 
late 2007 and 2008. By failing to disclose this relevant and material information when 
communicating with investors, Ribotsky misled investors into believing that, despite the adverse 
market conditions 
oflate 2007 and 2008, NIR could still fully liquidate the AJW Funds' assets in 
36 to 48 months. 
Additional False and Misleading Statements and Omissions of Material Fact 
49. In addition to the false and misleading statements Ribotsky made to investors in 
late 2007 and 2008 about the time it would take to liquidate the AJW Funds' assets, Ribotsky 
made other false and misleading statements in late 2007,2008, and 2009 about the AJW Fund's 
liquidity and performance. 
50. The following statement made by Ribotsky was false and misleading: 
October 21, 2008 email from Ribotsky to investor 
Investor: "What are the proceeds from converted stocks you have sold this month 
of October?" 
Ribotsky: "We typically sell $5 million to $15 million a month. This month 
[October] has been a little slower while September was a little better." 
51. Ribotsky's answer to this investor's question was false and misleading because 
the AJW Funds' monthly stock sales proceeds for.September and October 2008 were nowhere 
near the 
$5 to $15 million monthly range that Ribotsky referenced in his email. In fact, the AJW 
Funds' monthly stock sales proceeds for September and October 2008 were just $277,561  and 
----$131,802, respectively. Moreover, from February to October 2008, the AJW Funds' monthly 
proceeds from selling stock never exceeded 
$1 million. 
52. The investor to whom Ribotsky sent this false and misleading statement 

subsequently invested his IRA savings in the AJW Funds in early 2009. 

19 


53. The following statement made by Ribotsky was false and misleading: 
November 7-8,2007 email from Ribotsky to investor 
Ribotsky: "But in this case [ABPH] the liquidity ofthe deal is  within the time 
frame [2-4 years] 
we have allotted for it ...." 
54. Ribotsky's statement 
was false and misleading based on the 2007 market data 
available to him at the time he made the statement. According to the Auditor's subsequent 
calculations, which were based 
on essentially the same market data, the exit period for the 
particular investment Ribotsky was referring to in his email -
ABPH -  was approximately 20 
years. 
55. The following statement made 
by Ribotsky was false and misleading: 
March 30, 2008 email from Ribotsky to investor, attaching Due Diligence 
Questionnaire signed by Ribotsky 
Q: "What is the longest term held security in the fund and why?" 
A: "5 years but extremely small positions that continue to be slowly being 
[sic] sold into the market." 
56. This statement was false and misleading because Ribotsky knew at the time he 
made it that the AJW Funds had a number 
ofPIPE investments that were older than 5 years. In 
fact, the 
AJW Funds had PIPE investments in at least 15 companies that dated as far back as 
2000,2001 and 2002. These investments were still being carried 
on the AJW Funds' books, 
presumably because they were illiquid and 
NIR could not fully convert and sell out ofthese 
positions under 
NIR's stated investment and trading strategy. 
57. The following statement made 
by Ribotsky was false and misleading: 
December 10, 2008 email from Ribotsky to investor 
Investor: "When I inquired a few months ago, you ha4 not yet had any defaults or 
bankruptcies in your portfolio but indicated that is always a possibility. Have 
there been any defaults 
or bankruptcies since?" 
Ribotsky: "No defaults or no bankruptcies." 
20 


58. Ribotsky's statement was false and misleading because several companies in 
which the AJW Funds were invested had, at the time, already defaulted in 2008. On June 13, 
2008, Ribotsky was copied on an internal 
NIR email advising him that 2 portfolio companies 
were 
in default. The email read: "PFMS ... defaulted as of4/18 [and] RKLC ... defaulted as of 
5/2." Therefore, Ribotsky knew that at least two companies had defaulted in 2008 when he told . 
the investor there were 
"no defaults." In addition, another internal NIR email, dated August 21, 
2008, from an 
NIR analyst lists at least 3 companies that were in default: "Companies in default 
are ADMH, RKLC, UNVC." Although Ribotsky is not listed 
as a recipient ofthis email, the 
email was circulated within 
NIR and was based on the research ofan NIR employee. Therefore, 
this information was certainly available to Ribotsky 
when he told the investor that there were no 
defaults in 2008. This is the same investor who invested his IRA savings 
in the AJW Funds in 
early 2009. 
59. 	The following statements 
made by Ribotsky were false and misleading: 
(a) 	
June 30, 2008 email from Ribotsky to investor 
Investor: "Can you please tell me what the status [is ofthe AJW Funds' 
2007 audited financial statements] and why this is taking longer than 
expected
?" 
Rihotsky: "Unfortunately they [the Auditor] have taken longer this year 
and with 
our switch to the master/feeder structure have to do some 
additional audit procedures. FUrther to that there are 
new aUditing 
standards for all funds that are creating some backlog throughout the 
auditing community." 
Investor: "We know that dealing with an external auditor can take more 
time then [sic] expected. I 
just want to check ifthis is the only reason for 
the delay." . 
Rihotsky: "Yes this is the only reason for the delay." 
(b) 	
January 14, 2009 email from Ribotsky to investor 
Investor: "Why was the audit for 2007 not issued until August 14, 2008?" 
Rihotsky: "The 07 audit was delayed due to personnel changes at the 
auditor." 
21 


60. Ribotsky's answers were false and misleading because the delay in the 2007 audit 
ofthe AJW Funds' financial statements was due to the Auditor's concerns about whether NIR 
was properly recording the fair market value 
of the PIPE investments. The delay was not due to 
personnel changes at the Auditor or to the switch to the master feeder fund structure, as Ribotsky 
told the investors. In response to the Auditor's valuation concerns, and at the Auditor's request, 
NIR retained a third-party valuation expert in June 
2008 to review the methodology that NIR 
was using to record the fair market value 
ofthe PIPE investments. The third-party valuation 
expert completed its report in July 2008. The Auditor subsequently concluded its audit work and 
issued an unqualified audit report for the AJW Funds' year-end December 31, 2007 financial 
statements in August 2008. Ribotsky's failure to mention the real reason for the audit 
delay-
that the Auditor had concerns about whether NIR was properly recording the fair market value of 
the PIPE investments and, therefore, required additional audit procedures -  rendered Ribotsky's 
answers to the investors' questions about the audit delay false and misleading. 
61. The following statement made by Ribotsky was false and misleading: 
March 16, 2008 newsletter signed by Ribotsky to investors 
"In terms 
of [Q4 2007] deal highlights, the following are examples of two 
companies that we added to our portfolio 
... The first company is a developer of 
environmental process technology for photochemical, silver, and water recycling. 
.. The second portfolio company is focused on becoming the content 
management system for social networks and small business markets." 
62. Ribotsky's statement was false and misleading because the two companies 
described in the newsletter were not "added to [the] portfolio." Rather, they were existing 
portfolio companies that NIR simply provided additional financing to during the fourth quarter 
of2007. The ability ofNIR to continue making investments in new companies was important to 
investors because it demonstrated to investors that, despite the adverse market conditions in late 
2007 and 2008, there was still a market for 
NIR's PIPE investment strategy. 
22 

63. The false and misleading statements and omissions of material facts alleged above 
were made in the offer or sale and in connection with the purchase or sale 
ofsecurities because 
they were made to prospective and existing investors, many 
ofwhom made subsequent 
investments in the AJW Funds. For example, Ribotsky sent the March 
30,2008 email and 
attached due diligence report, described above, to a prospective overseas investor. After 
receiving the email and due diligence report, the overseas investor invested $25 million in the 
AJW Funds in May 2008. Moreover, Ribotsky sent the July 17,2008, October 21,2008, 
December 10,2008, and January 
14,2009 emails, described above, to the same prospective 
investor who, after receiving the emails, invested $122,256 
ofhis IRA money with the AJW 
Funds in early 2009. 
64. In addition, Ribotsky sent the October 16, 2008 letter, described above, to existing 
investors asking them to invest 
in newly-created AJW funds. The first sentence ofthe October 
16,2008 letter states: "We [NIR] are ... offering you interests in a newly-organized entity ...." 
NIR sent existing investors private placement memoranda and subscription agreements 
concerning the newly-created AJW funds. Existing investors who chose to invest in the newly­
created 
AJW funds did so by executing subscription agreements that represented their portion of 
ownership in the new AJW funds. 
Falsification 
of Investor Documents 
65. Ribotskyfb
.."ther defrauded investors by instructing Dworkin, an NIR employee, 
to mislead investors by, among other things, falsifying certain documents that were sent to 
investors. 
In particular, in August 2007, Ribotsky instructed Dworkin to inflate the total amount 
of investor money that NIR had invested in 57 deals during the first seven months of2007 
(through July 31,2007). Dworkin initially prepared the chart accurately showing that NIR had 
23 


invested a total of $31.4 million in the 57 deals for the relevant period. Dworkin then sent the 
chart 
by email to Ribotsky on August 13,2007. 
66. After Ribotsky reviewed the chart that Dworkin had prepared, Ribotksy stated 
"investors can't see this" and he instructed Dworkin to "change the number to something near 
$60 million" before sending it to investors, apparently because Ribotsky wanted investors to see 
an average investment 
ofat least $1 million per deal. Dworkin followed Ribotsky's instructions 
and changed the figure to $58.6 million 
on the chart. The next day, August 14,2007, Ribotsky 
sent the falsified chart by email to an investor. The falsified chart was also sent to at least one 
other investor 
on October 15,2007. 
The $43.2 Million Sale 
of Fund Assets 
67. By the fourth quarter 
of2008, Ribotsky knew that NIR's investment and trading 
strategy could not generate enough cash from selling stock to keep up with mounting investor 
redemption requests and that 
NIR was, in fact, starting to incur trading losses. The AJW Funds 
suffered nearly $3.9 million in realized trading losses in the month of October 2008 alone. Faced 
with the reality that his investment strategy would result in significant fourth quarter 2008 
realized trading losses -  and likely year-end realized trading losses as well -  Ribotsky entered 
into a series 
oftransactions in which he purported to sell some ofthe AJW Funds' assets (PIPE 
investments in the form ofconvertible debentures) that NIR valued at $43.2 million to the 
Purchaser and certain entities controlled by the Purchaser. 
68. In November and December 2008, Ribotsky (on behalf 
ofthe AJW Funds) and 
the Purchaser (on behalf 
ofhis entities) entered into nine separate transactions in which the AJW 
Funds purportedly sold $43.2 million 
ofconvertible PIPE debentures to the Purchaser's entities. 
The debentures that Ribotsky purported to sell the Purchaser had a  face value 
of$12.6 million, 
which represented the 
AJW Funds' principal investment in the companies that issued the 
24 


debentures. The Purchaser, however, did not pay cash for the debentures; rather, he signed a 
series 
of"promissory notes" agreeing to pay the full purchase price in cash within 3-6 months. 
The Purchaser also executed a "personal guarantee" promising to personally pay the full 
purchase price for the debentures in the event his entities could 
not do so. 
69. These transactions, however, were not in the best interests 
ofthe AJW Funds and 
its investors, and Ribotsky did not perform any due diligence with respect to the Purchaser or his 
entities before entering into the transactions. Ribotsky entered into the transactions in the hopes 
ofbeing able to hide the trading losses that the AJW Funds were incurring in the fourth quarter 
of2008. In fact, by recording the proceeds from the debenture transactions as "sales" on the 
books and records 
ofthe AJW Funds, NIR recorded $18 million in net realized gains on the 2008 
AJW Funds' books and records. Without the proceeds from the debenture transactions, however, 
the 2008 
AJW Funds' books and records would have reflected net realized losses of $3.4 million. 
70. The Purchaser defaulted 
on his payment obligations and to this date, he has not 
paid for the debentures. The Purchaser and his entities have control and possession 
ofthe 
debentures. Ribotsky has not commenced any legal action 
on behalf ofthe AJW Funds to seek 
payment for the debentures 
or their return to investors. Nor has Ribotskydisclosed to the 
investors that he arranged for the 
AJW Funds to sell $43.2 million oftheir assets, that the 
Purchaser defaulted 
on his payment obligations, and that the AJW Funds no longer have 
71. Ribotsky and 
NIR defrauded investors by failing to conduct any due diligence 
with respect to the Purchaser and his entities before entering into the multi-million dollar 
transaction with them. Ribotsky and 
NI.R failed to conduct any due diligence despite the fact 
25 


that NIR's offering materials and investor communications touted the "extensive" due diligence 
that 
NIR would conduct before making investment decisions on behalf of the AJW Funds. 
72. For example, Ribotsky and 
NIR made the following disclosures to investors 

relating to 
NIR's due diligence protocols: 

(a) 	
NIR Quarterly Newsletter signed by Ribotsky to investors, 
October 2008 
"NIR does extensive due diligence and credit work on all transactions." 
(b) 	
AJW Qualified Partners II, LLP Private Placement Memorandum, 
October 2008 
"The Investment Manager believes that the first and most essential step to 
successful investing is the identification and uncovering 
ofas much 
infonnation as possible about an investment opportunity. This process is 
facilitated 
by the extensive primary research conducted by the Investment 
Manager 
on businesses and industries." 
(c) 	
NIR Investor Presentation, (undated) 
"Extensive due diligence is perfonned before any investment is made .... 
[t]he process entails detailed descriptions and analysis of all pertinent 
financial, legal, and accounting infonnation both past and present." 
73. Despite these, and other similar, due diligence related representations made to 
investors, Ribotsky and 
NIR did not conduct any due diligence with respect to the Purchaser or 
his entities before entering into the transactions with them in November and December 2008. 
Ribotsky and 
NIR did not request or receive any documentation to assess the creditworthiness of 
the Purchaser and his entities, or to verify that the Purchaser and his entities had any meaningful 
assets 
or the financial means to pay for the debentures. 
74. Ribotsky's prior business dealings with the Purchaser should have placed 
Ribotsky 
on notice, ifhe was not already, that entering into the multi-million dollar transaction 
with the Purchaser was not 
in the best interest ofthe AJW Funds. Prior to entering into the 
debenture transactions in November and December 2008, Ribotsky knew, and in fact he had told 
others, that the Purchaser's character and reputation for honesty were suspect. For example, in 
26 


an email to a co-worker, dated April 30, 2008, Ribotsky wrote: "[The Purchaser] is a thief [sic] 
and crook." In another email, dated February 19,2008, Ribotsky wrote: "[The Purchaser] has a 
checkered past and now his reputation preceeds [sic] him." Ribotsky also knew, prior to 
November and December 2008, that the Purchaser paid bribes to an 
NIR employee in order to 
secure investments from the AJW Funds in start-up companies that the Purchaser was 
representing. Ribotsky learned about these bribes in September 2008, which was two months 
before Ribotsky entered into the transactions to sell AJW Fund assets to the Purchaser. 
75. Had Ribotsky or NIR performed any meaningful due diligence with respect to the 
Purchaser and his entities, as Ribotsky told investors NIR would do, Ribotsky would have known 
that entering into a multi-million dollar transaction on behalf 
oftheAJW Funds with the 
Purchaser and his entities clearly was not in the best interest of the AJW Funds. In particular, 
Ribotsky would have known that the Purchaser had a long history 
ofpersonal and business credit 
problems and outstanding judgments and that neither the Purchaser nor his entities had any 
meaningful assets or the financial means to pay for the debentures. 
76. In'fact, the Purchaser had less than $30,000 in the bank account 
ofhis entities at 
the time 
ofthe transactions in November and December 2008. Although at one point tl;1e 
Purchaser gave Ribotsky a $700,000 check towards the debenture purchases, the Purchaser 
subsequently stopped payment 
on the check before it was cashed. As ofthe date on the check, 
April 12, 2009, t..ltere was less than $500 in the ba.TIk accotL'lt on which the check was written. 
The Purchaser was also personally in debt and had limited financial means and credit. At the 
time, there were mUltiple collection matters and judgments against the Purchaser for over 
$270,000 in unpaid telephone, credit card, and department store bills. Even a cursory review 
of 
publicly available records would have shown that the collectability ofthe $43.2 million from the 
27 


Purchaser and his entities was highly unlikely within the 3-6 month payment period under the 
terms promissory notes, 
if ever. 
77. Moreover, after Ribotsky and the Purchaser entered into the last 
of the 
transactions on December 30, 2008, Ribotsky retained a private investigator to conduct a 
background check into the Purchaser. The investigator sent Ribotsky a detailed report on 
January 
4,2009 that, among other things, raised multiple red-flags about the Purchaser and his 
entities. In particular, the report listed the Purchaser's poor financial condition and the several 
outstanding collection matters and judgments against him and his entities. In fact, the very first 
page 
ofthe report cautioned Ribotsky as follows: 
This memorandum provides a rather disturbing background report on [the 
Purchaser]
.... The information on [the Purchaser] was so disturbing to us that we 
went to extra measures to verify these.data and to assure ourselves that all this 
negative information was indeed applicable to the subject and not the result 
of a 
confused identity. We are comfortable with the accuracy 
of this report but leave 
it to you to decide 
on how to proceed in any business dealings here. 
78. The report is dated January 
4,2009 -just days after Ribotsky closed the last 
debenture transactions with the Purchaser 
on December 30, 2008. 
Ribotsky Misled Investors When Forming the Master Fund 
79. By 2007, NIR's investment and trading strategy was not generating enough cash 
income (realized gains) to pay mounting investor redemption requests. Faced with a lack 
of cash 
to pay all 
ofthe outstanding investor redemption requests, Ribotsky paid the redemptions using 
other investors' money. 
80. In June 2007, Ribotsky combined 
an AJW off-shore fund with an AJW on-shore 
fund by creating a new "master/feeder" fund -  the Master Fund. The AJW on-shore fund and the 
AJW off-shore fund were the only shareholders in the Master Fund. Pursuant to the 
28 


reorganization, all or substantially all of the assets of both the on-shore and the off-shore funds 
were transferred to the Master Fund in exchange for shares 
of the Master Fund. 
81. . At the time Ribotsky merged the on-shore and off-shore funds, there was $39 
million 
in outstanding investor redemption requests in the on-shore fund that were payable in 
June and September 2007. However, there was only 
·$13 million in cash in the. on-shore fund to 
meet these pending redemption requests. During that same period, there was $124 million in 
cash in the off-shore fund, but only $28 million in outstanding investor redemption requests in 
that fund. Faced with a lack 
ofavailable cash and the inability to generate sufficient cash by 
converting and selling out 
ofthe PIPE investments, Ribotsky decided to merge the on-shore and 
off-shore funds 
so that he could use the cash in the off-shore fund to pay the outstanding 
redemptions in the on-shore fund. 
82. Ribotsky, however, did not disclose to investors in the on-shore and off-shore 
funds the real reason why he was merging the funds to create the Master Fund. Rather, Ribotsky 
misleadingly told investors that the reason he was merging the funds was because a master 
feeder fund structure was 
inthe best interest ofthe investors in both funds. In a letter to 
investors, dated May 
7, 2007, Ribotsky stated that the transition by merger to a "master-feeder 
fund structure" was "in the best interest 
ofthe [funds]." He further stated that the merger will 
provide for a "larger pool 
ofassets from which to draw," "will be better able to take advantage of 
available investment opportllnities and provide increased liquidity," and will "ease the 
administrative burden on the [funds]." At a minimum, in order to make his statements to 
investors not misleading, Ribotsky should have disclosed the fact that he was merging the two 
funds so that he could use the cash in the off-shore fund to pay the outstanding investor 
redemptions in the on-shore fund. 
29 


FIRST CLAIM FOR RELIEF 

Violations of Section 17(a) of the Securities Act 

(NIR and Ribotsky) 

83. Paragraphs 1 through 82 are re-alleged and incorporated by reference as if fully 
set forth herein. 
84. NIR and Ribotsky, directly or indirectly, singly or in concert, in the offer or sale 
of securities by the use ofmeans or instruments of transportation or communication in interstate 
commerce or by use 
of the mails: (a) employed devices, schemes or artifices to defraud; (b) 
obtained money or property by means 
ofuntrue statements ofmaterial fact, or omitted to state a 
material fact necessary in order to make statements made, in light 
of the circumstances under 
which they were made, not misleading; and/or (c) engaged in transactions, practices, or courses 
ofbusiness which operate or would operate as a fraud or deceit upon the purchaser. 
85. NIR's and Ribotsky's false and misleading statements and omissions were 
material because, among other reasons, the misrepresented and omitted facts were important 
to 
prospective and existing investors when making investment decisions concerning the AJW 
Funds. 
86. By reason 
ofthe activities described herein, and in particular the false and 
misleading statements and omissions alleged above, NIR and Ribotsky violated Section 17(a) 
of 
the Securities Act [15 U.S.c. §§ 77q(a)]. 
SECOND CL~A...!M FOR :RELIEF 

Violations of Section 10(b) of the Exchange Act and Rule 10b-5 

(NIR and Ribotsky) 

87. Paragraphs 1 through 86 are re-alleged and incorporated by reference as if fully 
set forth herein. 
88. NIR and Ribotsky, directly or indirectly, singly or 
in concert, in connection with 
30 


the purchase or sale of securities by use ofmeans or instrumentalities of interstate commerce, or 
ofthe mails, or ofthe facilities ofa national securities exchange, with scienter: (a) employed 
devices, schemes or artifices to defraud; (b) made untrue statements 
of a material fact or omitted 
to state a material fact necessary in order to make the statements made, in the light 
ofthe 
circumstances under which they were made, not misleading; and/or (c) engaged in acts, 
, practices, 
or courses of business which operate or would operate as a fraud or deceit upon other 
persons. 
89. NIR's and Ribotsky's false and misleading statements and omissions were 
material because, among other reasons, the misrepresented and omitted facts were important to 
prospective and existing investors when making investment decisions concerning the AJW 
Funds. 
90. By reason 
ofthe activities described herein, and in particular the false and 
misleading statements and omissions alleged above, NIR and Ribotsky violated Section 1 
O(b) of 
the Exchange Act [15 U.S.C. § 78j(b)] and Rule lOb-5 [17 C.F.R. § 240.10b-5] thereunder. 
THIRD CLAIM FOR RELIEF 

Violations 
of Sections 206(1) and 206(2) of the Advisers Act 

(NIR and Ribotsky) 

91. Paragraphs 1 through 90 are re-alleged and incorporated by reference as 
if fully 
set forth herein. 
92. NIR and F..ibotsky at 
all relevant times were acting as investment advisers to the 
AJW Funds within the meaning 
ofSection 202(11) ofthe Advisers Act [15 U.S.C. § 80b-2(11)]. 
93. NIR and Ribotsky, directly or indirectly, singularly or in concert, by use 
ofthe 
mails or means and instrumentalities 
of interstate commerce, while acting as investment 
advisers: (a) with scienter employed devices, schemes or artifices to defraud any client or 
31 


prospective client; andlor (b) engaged in transactions, practices, or courses of business which 
operated as a fraud or deceit upon any client or prospective client. 
94. As investment advisers to the AJW Funds, NIR and Ribotsky owed the AJW 
Funds 
fiduciary duties 
of utmost good faith, fidelity, and care to make full and fair disclosure to 
them 
of all material facts concerning the AJW Funds -  including any conflicts or potential 
conflicts 
of interests -  as well as the duty to act in the AJW Funds' best interests, and not to act 
in their own interests to the detriment of the AJW Funds. 
95. NIR and Ribotsky breached their fiduciary duties to the AJW Funds, engaged in 
fraudulent conduct and engaged in a scheme to violate 
Sections 206(1) and 206(2) 
ofthe 
Advisers Act [15 U.S.C. §§ 80b-6(1), (2)] by misappropriating approximately $1 million from 
the 
AJW Qualified Fund, as described above. 
96. By reason 
of the activities described herein, NIR and Ribotsky violated Sections 
206(1) and 206(2) 
ofthe Advisers Act [15 U.S.C. §§ 80b-6(1), (2)]. 
FOURTH CLAIM FOR RELIEF 

Violations of Section 206(4) of the Advisers Act and Rule 206(4)-8 

(NIR and Ribotsky) 

97. Paragraphs 1 through 96 are re-alleged and incorporated by reference as if fully 
set forth herein. 
98. NIR and Ribotsky, while acting as investment advisers to pooled investment 
vel"tides, the AJW Fu..'1ds, directly or i..'ldirectly, by use ofth.e mails or means or instrumentalities 
of interstate commerce: ( a) made untrue statements ofmaterial fact or omitted to state a material 
fact necessary to make the statements made, in the light 
ofthe circumstances under which they 
were made, not misleading to any investor or prospective investor in the pooled investment 
vehicles; andlor (b) engaged in any acts, practices, or courses 
of business that were fraudulent, 
32 


deceptive, or manipulative with respect to any investor or prospective investor in the pooled 
investment vehicles. 
99. NIR's and Ribotsky's false and mIsleading statements and omissions alleged 
above were material because, among other reasons, the misrepresented and omitted facts were 
important to prospective and exiting investors when making investment decisions concerning the 
pooled investment vehicles. 
100. NIR and Ribotsky violated Section 206(4) 
ofthe Advisers Act [15 U.S.C. § 80b­
6(4)] and Rule 206(4)-8 thereunder [17 C.F.R. § 275.206(4)-8] by knowingly, recklessly or 
negligently making the 
materiill misrepresentations and omissions alleged above. 
101. By reason 
ofthe activities described herein, NIR and Ribotsky violated Section 
206(4) 
ofthe Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 206(4)-8 thereunder [17 C.F.R. § 
275.206(4)-8]. 
FIFTH CLAIM FOR RELIEF 

Aiding and Abetting Violations 
of 

Section lOeb) ofthe Exchange Act and Rule IOb-5 

(Dworkin) 

102. Paragraphs 1 through 101 are re-alleged and incorporated by reference as if fully 
set forth herein. 
103. NIR and Ribotsky, 
in connection with the purchase and sale of securities, directly 
and indirectly, by the use ofthe means and instrumentalities of interstate commerce or ofthe 
mails, knowingly or recklessly (a) have employed devices, schemes and artifices to defraud; (b) 
have made untrue statements of material fact and have omitted to state material facts necessary 
in order to make the statements made, in the light ofthe circumstances under which they were 
made, not misleading; (c) and/or have engaged in acts, practices and courses 
of business which 
operate as a fraud and deceit upon investors. 
33 

104. Dworkin knowingly provided substantial assistance to NIR and Ribotsky in the 
commission 
of these violations. 
105. By reason 
of the activities described, Dworkin aided and abetted NIR's and 
Ribotsky's violations 
of Section IO(b) ofthe Exchange Act [15 U.S.C. §§78j(b)] and Rule lOb-5 
thereunder [17 C.F.R. §240.1 
0~-5]. 
SIXTH CLAIM FOR RELIEF 

Aiding and Abetting Violations of 

Section 206(4) of the Advisers Act and Rule 206(4)-8 

(Dworkin) 

106. .  Paragraphs 1 through 
105 are re-alleged and incorporated by reference as if fully 
set forth herein. 
107. NIR and Ribotsky, as investment advisers, made untrue statements 
ofmaterial 
facts and omitted to state material facts necessary to make the statements made, in light 
of the 
circumstances under which they were made, not misleading, to any investor or prospective 
investor in pooled investment vehicles; and 
NIR and Ribotsky otherwise engaged in acts, 
practices, or courses 
of business that are fraudulent, deceptive, or manipulative with respect to 
any investor or prospective investor in the pooled investment vehicle. 
108. Dworkin knowingly provided substantial assistance 
toNIR and Ribotsky in the 
commission 
of these violations. 
109. By reason 
ofthe activities described herein, Dworkin aided and abetted NIR's and 
Ribotsky's violations 
of Section 206(4) ofthe Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 
206(4)-8 thereunder [17 C.F.R. § 275.206(4)-8]. 
34 


PRAYER FOR RELIEF 
WHEREFORE, 
the·Comrnission respectfully requests a Final Judgment: 
I. 
Pennanently enjoining NIR and Ribotsky, their agents, servants, employees, attorneys, 
and all persons in active concert 
or participation with them who receive actual notice ofthe 
injunction by personal service or otherwise, and each 
ofthem, from future violations of Section 
17(a)ofthe Securities Act [15 U.S.C.§ 77q(a)], Section lOeb) ofthe Exchange Act [15 U.S.C. § 
78j(b)] and Rule lOb-5 [17 C.F.R. § 240.lOb-5] thereunder, Sections 206(1),206(2), and 206(4) 
ofthe Advisers Act [15 U.S.C. §§ 80b-6(1), (2) and (4)] and Rules 206(4)-8 thereunder [17 
C.F.R. § 275.206(4)-8]. 
II. 
Pennanently enjoining Dworkin, his agents, servants, employees and attorneys and all 
persons in active concert or participation with him who receive actual notice 
ofthe injunction by 
personal service or otherwise, and each 
ofthem, from violating and aiding and abetting 
violations 
of Section lOeb) ofthe Exchange Act [15 U.S.C. § 78j(b)] and Rule lOb-5 thereunder 
[17 C.F.R. § 240.lOb-5], and Section 206(4) 
ofthe Advisers Act [15 U.S.C. §§ 80b-6(4)] and 
Rule 206(4)-8 thereunder [17 C.F.R. § 275.206(4)-8]. 
III. 
Ordering NIR and Ribotsk-y, on a joint ai"id several basis, and Dworkin to disgorge any 
ill-gotten gains received from their violative conduct alleged in this complaint, and to pay 
prejudgment interest thereon. 
35 


IV. 
Ordering NIR and Ribotsky to pay civil money penalties pursuant to Section 20( d) of the 
Securities Act 
[15 U.S.C. § 77t(d)], Section 21(d)(3) ofthe Exchange Act [15 U.S.c. § 
78u(d)(3)], and Section 209 
ofthe Advisers Act [15 U.S.C. § 80b-9]; and ordering Dworkin to 
pay civil money penalties pursuant to Section 21(d)(3) 
ofthe Exchange Act [15 U.S.C. § 
78u(d)(3)] and Section 209(e) ofthe Advisers Act [15 U.S.C. § 80-9(e)]. 
V. 
Granting such other and further relief as the Court may deem just and proper. 
Dated: 
New York, NY 

September 28,2011 

~s~~---
Regional Director 
Attorney for the Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
New York Regional Office 
3 World Financial Center -  Suite 400 
New York, New York 10281 
(212) 336-0589 (Fischer) 
Email: [email protected] 
Of Counsel: 
David Rosenfeld 
Joseph Dever: ID-9589; [email protected] 
Howard Fischer: HF-8582; [email protected] 
Kenneth Byrne: KB-9376; [email protected] 
36