SEC v. Discovery Capital Group; Erik Walsh; and John Abresch, No. LR-17420, Southern District of Florida (Mar. 19, 2002) — Press Release
raw: Discovery Capital Group, Erik Walsh, and John Abresch
Discovery Capital Group, Erik Walsh, and John Abresch, No. LR-17420 (Mar. 19, 2002)
The SEC charged Discovery Capital Group, CEO Erik Walsh, and VP John Abresch with orchestrating a $2.7 million fraudulent securities offering using false claims of E.F. Hutton affiliation and an imminent IPO, misappropriating over $630,000 in investor funds and failing to record $1.3 million in loans, leading to a court-ordered asset freeze, receiver appointment, and demands for disgorgement and penalties.
The SEC alleged that Discovery Capital Group, its CEO Erik Walsh, and VP John Abresch raised at least $2.7 million from investors through fraudulent promissory notes and preferred stock sales, falsely claiming ties to E.F. Hutton and an impending IPO. Walsh misappropriated $130,000 by falsely recording it as his capital contribution, while Abresch received over $500,000 in illicit proceeds; the firm also failed to account for $1.3 million in loans, violating net capital rules and endangering customer assets. The SEC charged them with violations of Section 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Exchange Act, along with multiple recordkeeping and brokerage regulations, and sought injunctions, disgorgement, and civil penalties after a federal judge imposed an asset freeze and appointed a receiver.
The SEC filed an emergency civil action against Discovery Capital Group, its CEO Erik Walsh, and VP John Abresch for orchestrating a fraudulent securities offering that raised at least $2.7 million from U.S. and international investors since June 2001. Using high-pressure 'boiler-room' tactics, sales agents falsely claimed the firm was affiliated with the historic E.F. Hutton, partnered with major banks, and was poised for an IPO—claims all fabricated, as the E.F. Hutton entity referenced was a newly formed, unrelated company. In reality, Discovery Capital had minimal legitimate business and primarily funneled investor funds to its principals, with Walsh improperly crediting $130,000 as his own capital contribution and Abresch receiving over $500,000. The firm also failed to record $1.3 million in loans, violating net capital requirements under the Exchange Act and exposing brokerage customers to financial risk. The SEC charged all three defendants with violations of Section 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Exchange Act, as well as multiple recordkeeping and brokerage rules. On March 15, 2002, a federal judge granted an emergency temporary restraining order, froze the defendants’ assets, and appointed a receiver to halt the scheme and preserve funds pending litigation. The SEC is seeking permanent injunctions, disgorgement of all ill-gotten gains, and civil monetary penalties against the defendants.
Extracted insights
- $2.70M $2.7 MILLION $1M–$10M
- $2.70M $2.7 million $1M–$10M
- $1.30M $1.3 million $1M–$10M
- $500K $500,000 $100K–$1M
- $130K $130,000 $100K–$1M
- company discovery capital
- person federal judge
- person honorable paul t. huck
- company order appointing a receiver over discovery capital
- company sales agents employed by discovery capital
- agency Securities and Exchange Commission
- Federal Judge Enjoins Coral Springs Broker-Dealer Which Raised Over $2.7 Million In Connection With Alleged Fraudulent Securities Offering
- Securities and Exchange Commission Announced Filing Of Emergency Federal Civil Action Against Discovery Capital Group, Inc., Erik Walsh, And John Abresch
- Honorable Paul T. Huck Entered Temporary Restraining Order And Asset Freeze To Halt The Alleged On-going Offering Of Securities By Discovery Capital, Walsh And Abresch
- The Court Entered Order Appointing A Receiver Over Discovery Capital
- Discovery Capital Raised At Least $2.7 Million From Investors In The U.S. And Abroad Through The Sale Of Securities In The Form Of Promissory Notes And Preferred Stock
- Sales Agents Employed By Discovery Capital Falsely Tell Prospective Investors That Discovery Capital Is Affiliated With The Well-known Brokerage Firm, E.F. Hutton, Has Partnered With Major Banks, Or Is Poised To Go Public Through An Initial Public Offering (Ipo)
- Discovery Capital Has Minimal Legitimate Business Activities Its Primary Business Activity Since November 2001 Has Been To Raise Investor Funds For The Benefit Of Its Principals And Sales Agents, Including Over $500,000 To Defendant John Abresch
- E.F. Hutton Affilation Was With A Company Recently Formed By Walsh Called E.F. Hutton & Company, Inc. That Had No Ties To The Original, And Now Defunct, E.F. Hutton
- Defendants Failed To Record At Least $1.3 Million Worth Of Loans On The Books And Records Of Discovery Capital
- Walsh Misappropriated At Least $130,000 Of The Money Raised From Investors By Improperly Crediting Those Funds In Discovery Capital's Books And Records As His Own Capital Contributions
- The Commission Alleges Discovery Capital, Walsh And Abresch With Violations Of Section 17(a) Of The Securities Act Of 1933 And Section 10(b) Of The Exchange Act And Rule 10b-5 Thereunder
- The Commission Seeks Preliminary And Permanent Injunctions, Disgorgement Of Ill-gotten Profits And A Civil Money Penalty Against All Defendants
Litigation Release No. 17420 / March 19, 2002 FEDERAL JUDGE ENJOINS CORAL SPRINGS BROKER-DEALER WHICH RAISED OVER $2.7 MILLION IN CONNECTION WITH ALLEGED FRAUDULENT SECURITIES OFFERING SECURITIES AND EXCHANGE COMMISSION V. DISCOVERY CAPITAL GROUP, ERIK WALSH, AND JOHN ABRESCH, Case No. 02-60363-CIV-HUCK (S.D. Fla., filed March 14, 2002) The Securities and Exchange Commission ("SEC" or the "Commission") announced that on March 14, 2002 it filed an emergency federal civil action against Discovery Capital Group, Inc., a broker-dealer registered with the Commission since 1992, Erik Walsh, the Company's CEO, and John Abresch, the Company's vice president and director of institutional sales (collectively, "defendants"). On the next day, the Honorable Paul T. Huck, United States District Judge for the Southern District of Florida, entered, among other things, a temporary restraining order and an asset freeze to halt the alleged on-going offering of securities by Discovery Capital, Walsh and Abresch. The Court also entered an order appointing a Receiver over Discovery Capital. The Complaint, alleges the following: since at least June 2001 through the present, Discovery Capital has raised at least $2.7 million from investors in the U.S. and abroad through the sale of securities in the form of promissory notes and preferred stock. Using high pressure, "boiler-room" tactics, sales agents employed by Discovery Capital falsely tell prospective investors, among other things, that Discovery Capital is affiliated with the well-known brokerage firm, E.F. Hutton, has "partnered" with major banks, or is poised to "go public" through an initial public offering ("IPO"). In reality, Discovery Capital is a registered broker-dealer with minimal legitimate business activities - its primary business activity since November 2001 has been to raise investor funds for the benefit of its principals and sales agents, including over $500,000 to Defendant John Abresch. The E.F. Hutton affilation was with a company recently formed by Walsh called "E.F. Hutton & Company, Inc." that had no ties to the original, and now defunct, E.F. Hutton. In addition to paying themselves lucrative salaries and commissions, Defendants have failed to record on the books and records of Discovery Capital at least $1.3 million worth of loans, placing Discovery Capital in violation of net capital rules under the securities laws and, thereby, placing its brokerage customers at risk. The Complaint also alleges that Walsh misappropriated at least $130,000 of the money raised from investors by improperly crediting those funds in Discovery Capital's books and records as his own capital contributions. As a result, the Commission alleges that Discovery Capital, Walsh and Abresch with violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and Discovery Capital with additionally violating Sections 15(c) and 17(a) of the Exchange Act and Rules 15c1-2, 15c3-1, 17a-3, 17a-4, 17a-5 and 17a-11 thereunder. The SEC is also seeking in its lawsuit preliminary and permanent injunctions, disgorgement of ill-gotten profits and a civil money penalty against all defendants. SEC Complaint in this matter.Litigation Release No. 17420 / March 19, 2002 FEDERAL JUDGE ENJOINS CORAL SPRINGS BROKER-DEALER WHICH RAISED OVER $2.7 MILLION IN CONNECTION WITH ALLEGED FRAUDULENT SECURITIES OFFERING SECURITIES AND EXCHANGE COMMISSION V. DISCOVERY CAPITAL GROUP, ERIK WALSH, AND JOHN ABRESCH, Case No. 02-60363-CIV-HUCK (S.D. Fla., filed March 14, 2002) The Securities and Exchange Commission ("SEC" or the "Commission") announced that on March 14, 2002 it filed an emergency federal civil action against Discovery Capital Group, Inc., a broker-dealer registered with the Commission since 1992, Erik Walsh, the Company's CEO, and John Abresch, the Company's vice president and director of institutional sales (collectively, "defendants"). On the next day, the Honorable Paul T. Huck, United States District Judge for the Southern District of Florida, entered, among other things, a temporary restraining order and an asset freeze to halt the alleged on-going offering of securities by Discovery Capital, Walsh and Abresch. The Court also entered an order appointing a Receiver over Discovery Capital. The Complaint, alleges the following: since at least June 2001 through the present, Discovery Capital has raised at least $2.7 million from investors in the U.S. and abroad through the sale of securities in the form of promissory notes and preferred stock. Using high pressure, "boiler-room" tactics, sales agents employed by Discovery Capital falsely tell prospective investors, among other things, that Discovery Capital is affiliated with the well-known brokerage firm, E.F. Hutton, has "partnered" with major banks, or is poised to "go public" through an initial public offering ("IPO"). In reality, Discovery Capital is a registered broker-dealer with minimal legitimate business activities - its primary business activity since November 2001 has been to raise investor funds for the benefit of its principals and sales agents, including over $500,000 to Defendant John Abresch. The E.F. Hutton affilation was with a company recently formed by Walsh called "E.F. Hutton & Company, Inc." that had no ties to the original, and now defunct, E.F. Hutton. In addition to paying themselves lucrative salaries and commissions, Defendants have failed to record on the books and records of Discovery Capital at least $1.3 million worth of loans, placing Discovery Capital in violation of net capital rules under the securities laws and, thereby, placing its brokerage customers at risk. The Complaint also alleges that Walsh misappropriated at least $130,000 of the money raised from investors by improperly crediting those funds in Discovery Capital's books and records as his own capital contributions. As a result, the Commission alleges that Discovery Capital, Walsh and Abresch with violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and Discovery Capital with additionally violating Sections 15(c) and 17(a) of the Exchange Act and Rules 15c1-2, 15c3-1, 17a-3, 17a-4, 17a-5 and 17a-11 thereunder. The SEC is also seeking in its lawsuit preliminary and permanent injunctions, disgorgement of ill-gotten profits and a civil money penalty against all defendants. SEC Complaint in this matter.