SEC v. Kirby JON HINES CALDWELL; and GREGORY ALAN SMITH, No. 5:18-cv-00434, Western District of Louisiana (Mar. 30, 2018) — Complaint

UNITED STATES DISTRICT COURT
DISTRICT OF WESTERN LOUISIANA
SHREVEPORT DIVISION
SECURITIES AND EXCHANGE COMMISSION,
CASE NO.
Plaintiff,
VERSUS
KIRBY JON HINES CALDWELL and
GREGORY ALAN SMITH,
Defendants,
JUDGE
MAGISTRATE JUDGE
COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF
Plaintiff Securities and Exchange Commission (the "Commission") alleges as follows:
INTRODUCTION
1. The Commission brings this action to enjoin Kirbyjon Hines Caldwell
("Caldwell") and Gregory Alan Smith ("Smith") ( collectively "Defendants") from further
violations
of the registration and antifraud provisions of the federal securities laws by offering
and selling participation rights in certain historical Chinese bonds (the "bonds") to mostly
vulnerable and elderly investors, some
of whom liquidated their annuities to invest in this
scheme.
2. Between approximately April 2013 and August 2014, Defendants raised at least
$3,488,500 through a scheme to defraud approximately 29 investors through the fraudulent offer
and sale
of the bonds. Among other material misrepresentations and omissions, Defendants
falsely represented to these investors that the bonds were safe, risk-free, worth tens,
if not
hundreds,
of millions of dollars, and could be sold to third parties. In reality, the bonds were
mere collectible memorabilia with no investment value. Both Caldwell and Smith exerted

control and influence over the scheme, and offered credibility to the investment by, respectively,
being a well-known pastor and claiming
to be an investment adviser.
3. Through their conduct, Caldwell and Smith violated Sections 5(a), 5(c), and l 7(a)
of the Securities Act of 1933 ("Securities Act") [15 U.S.C. §§ 77e(a), 77e( c), and 77q(a)], and
Section IO(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §  78j(b)],
and Rule l0b-5 thereunder, [17 C.F.R. § 240.l0b-5]. Further, Smith violated Sections 206(1)
and 206(2)
of the Investment Advisers Act of 1940 ("Advisers Act") [15 U.S.C. §§ 80b-6(1) and
80b-6(2)]. Unless the Court enjoins the Defendants, they are reasonably likely to continue to
violate these provisions
of the federal securities laws.
DEFENDANTS
4. Caldwell, age 64, is a  resident of Houston, Texas. During the relevant period,
Caldwell was the Senior Pastor at Windsor Village United Methodist Church (the "church"), one
of the largest Protestant churches in the U.S. In the past, Caldwell has been a board member of
various public companies, and he currently serves on the board of a company traded on the New
York Stock Exchange. Caldwell also acted
as a  director to a  mutual fund complex during the
relevant time period. He and his wife are the co-owners of LDT, LLC ("LDT"), a  Wyoming
limited liability company which received and held investor funds.
5. Smith, age 55, is a  resident of Shreveport, Louisiana. Between December 1999
and July 2010, Smith was associated with a  registered broker-dealer. In July 2010, Smith was
permanently barred from association with any FINRA member in any capacity, in part for
commingling investor funds
in his business account and for misappropriating investor funds.
2

JURISDICTION AND VENUE
6. The Court has jurisdiction over this action pursuant to Sections 20(b ), 20( d)( I),
and 22(a)
of the Securities Act[l5 U.S.C. §§ 77t(b), 77t(d)(l), and 77v(a)]; Sections 2l(d) and
27(a)
of the Exchange Act [15 U.S.C. §§ 78u(d) and 78(a)]; and Section 209(d) and 214(a) of the
Advisers Act [15 U.S.C. §§ 80b-9(d) and 80b-14(a)].
7. The Court has personal jurisdiction over the Defendants, and venue is proper in
the Western District
of Louisiana, because many of the Defendants' acts and transactions
constituting violations
of the federal securities laws occurred in the district. In addition, at all
relevant times, Smith and the vast majority
of the victims resided in the district.
8. In connection with the conduct alleged in the Complaint, the Defendants, directly
and indirectly, singly
or in concert with others, made use of the means or instrumentalities of
interstate commerce, the means or instruments of transportation or communication in interstate
commerce,
or the mails.
FACTS
A. Background and Mechanics of the Offering
9. From at least April 2013 until August 2014, Caldwell and Smith offered and sold
to at least 29 investors participation rights in various historical or Pre-revolutionary Chinese
Bonds which Caldwell claimed to own, control, or possess. In some cases, Defendants told
investors that their funds would be used to purchase the bonds. Smith, who worked as a
financial planner, was responsible for finding investors for this offering. He did so
by promising
investors exorbitant returns. Smith also represented to many investors that he was an
''investment adviser" with many years
of prior experience assisting others with their investments
and he advised these individuals concerning whether to invest in this scheme.
3

10. Smith was instrumental in securing investors for this scheme because he had
longstanding ties to prospective investors and operated under the guise
of an investment adviser
with many years
of experience advising clients on similar deals. In one case, Smith promised an
investor that she would receive
15 times her original investment within 30 days and any funds
she invested  would be returned within 5  days
of any demand for the funds. Smith also falsely
told her that he (Smith) had personally invested $250,000 in the deal.
11. Once an investor agreed to invest, Caldwell instructed the investor to wire transfer
payment
to either a bank account controlled by his attorney or an account in the name of LDT, a
Wyoming limited liability company whose only members are Caldwell and his wife.
Immediately after the investor sent the money, Caldwell would cause the funds
to be transferred
to personal accounts of Caldwell, Smith, or a Mexican business associate.
B. The Material Misrepresentations and Omissions about the Bonds
1. Background on Pre-Revolutionary Chinese Bonds
12. Prior to the 1949 communist takeover in China, the former republic issued
billions
of dollars' worth of government bonds. These bonds have been in default since 1939
and the current Chinese government refuses
to recognize the debt.
2. Material Misrepresentations and Omissions
13. Smith successfully raised money for this offering by claiming the deal was
available to only a  few select individuals. Smith falsely told some investors that the money
raised would be used to acquire more Chinese bonds. He repeatedly told investors that the bonds
were "risk free," "guaranteed," and "safe" and that there were buyers lined up to purchase the
bonds. Smith also told investors that the bonds would either be sold to a third party
or redeemed
by the Chinese government. Caldwell also made similar oral misrepresentations to several
4

investors about the safety of the investment, both before and after they invested. In fact, he even
told one investor who invested approximately $800,000 that the bonds were backed by gold or
silver. Both Smith and Caldwell told investors that the bonds were valuable and worth tens,
if
not hundreds, of millions of dollars. Neither disclosed that the bonds were in default and no
liquid market for the bonds existed. Caldwell and Smith also never told investors they would use
investor funds
to pay for personal expenses.
14. Although many investors did not understand the investment, they ultimately
trusted Smith and took comfort in the fact that a high-profile pastor was offering the investment.
Among other things, Smith falsely represented to investors that he too had invested in the bonds
and that investors were guaranteed a return on investment which would be paid in less than one
year.
In one case he promised a  return on investment in as little as 30 days. However, Smith
failed to tell these investors that these bonds had already matured and had been in default for
decades, or that they were not redeemable
at all. Smith also failed to disclose that he was
receiving compensation for recommending the investment to prospective investors.
3. The Participation Agreements
15. Once Smith found investors for the offering, Caldwell directed his attorney to
draft a  participation agreement containing the terms
of the investment. The participation
agreements, many signed by Caldwell, usually included the investment amount, a vague
description
of the bond, an exorbitant return on investment, a profit-sharing provision, depository
bank information, and a "failure to close" option pursuant to which the investor could request his
or her money back in the event Caldwell was unable
to sell the bonds. Many of the participation
agreements given to investors generally described the bonds as "historical Chinese Bonds" and
5

several of the agreements specifically identified the bonds as having a  date before the Chinese
communist revolution in 1949.
16. Under the terms of the participation agreements, the investors' expectation of a
return on their investment was based solely upon Caldwell's ability to sell the bonds to a  third
party purchaser.
In fact, many of the participation agreements expressly stated that Caldwell was
in control and possession
of the bonds and that he planned to sell the bonds to third party
purchasers. All investors invested money in a common enterprise with the expectation
of profits
solely from the efforts
of the promoters or third parties. This offering was not registered with the
Commission. Specifically,
no registration statement was filed or in effect pursuant to the
Securities Act with respect
to the offering. Furthermore, most of the investors who invested in
this scheme were not accredited and
no exemption from registration was available. In fact, many
were unsophisticated retirees who liquidated their annuities to invest in this scheme pursuant to
Smith's advice.
4. Lulling Emails and Texts
17. Throughout 2014, Caldwell and Smith continued to send emails and texts
promising investors that they would be paid. These lulling emails usually provided elaborate
explanations for why Caldwell had  been unable
to sell the bonds. Excuses ranged from issues
pertaining to international currency exchanges to failures
of international organizations like the
International Monetary Fund or the World Bank to approve the redemptions. Although these
excuses sounded plausible to some investors, they had
no basis in fact.
18. In some emails Defendants promised that an alleged prospective buyer was
interested in purchasing
or redeeming the bonds, and that the deal would close within a  short
period
of time. However, none of these deals ever transpired.
6

19.
Caldwell
also
held
frequent
investor
calls
to
explain
the
reasons
for
the
delays.
Smith
and
purported
foreign
intermediaries
participated
in
these
calls
to
provide
further
insight
on
the
status
of
the
sale
of
the
bonds
to
third
parties.
Many
investors
received
lulling
emails
and
text
messages
from
Caldwell
or
Smith.
Some
investors
spoke
directly
with
Caldwell
about
the
failed
deals.
He
repeatedly
told
them
to
remain
faithful
and
that
they
would
receive
their
money.
Caldwell
also
used
religious
references
in
his
lulling
emails
to
give
investors
hope
that
they
would
soon
be
repaid.
Finally,
Caldwell
sometimes
used
the
alias
"Turner
Hines"
when
communicating
with investors.
20.
Caldwell
and
Smith
received
approximately
$760,000
and
$1,000,000,
respectively,
of
investor
funds.
LDT,
controlled
by
Caldwell,
also
received
approximately
$1,000,000
of
investor
funds,
approximately
$175,000
of
which
was
transferred
to
Caldwell.
Offshore
third
parties,
at
least
one
in
Mexico,
received
most
of
the
remainder
of
the
investor
funds.
Investor
funds
were
comingled
with
other
funds
in
Caldwell's
and
Smith's
bank
accounts.
Caldwell
and
Smith
used
these
accounts
in
part
to
pay
for
personal
expenses,
including
mortgage
payments
in
the
case
of
Caldwell
and
luxury
automobiles
in
the
case
of
Smith.
No
investor
to
date
has
ever
received
any
return
on
his
or
her
investment.
The
great
majority
of
investors
have
never
even
received
their
principal
back.
CLAIMS
FOR
RELIEF
COUNTI
Violations
of
Section
S(a)
and
(c)
of
the
Securities
Act
(As
to
Caldwell
and
Smith)
21.
The
Commission
repeats
and
realleges
Paragraphs
1 through
20
of
its
Complaint.
7

22. No registration statement was filed or in effect with the Commission pursuant to
the Securities Act with respect to the securities and transactions described in this Complaint and
no exemption from registration existed with respect to these securities and transactions.
23. From April 2013 through August 2014, Defendants, directly and indirectly:
(a) Made use
of means or instruments of transportation or communication in
interstate commerce or
of the mails to sell securities as described herein,
through the use or medium
of a prospectus or otherwise;
(b) Carried securities or caused such securities, as described herein, to be
carried through the mails or in interstate   commerce,
by any means or
instruments
of transportation, for the purpose of sale or delivery after sale; or
(c) Made use of means or instruments of transportation or communication in
interstate commerce or
of the mails to offer to sell or offer to buy through the
use or medium
of a  prospectus or otherwise, as described herein, without a
registration statement having been filed or being in effect with the Commission
as to such securities.
24.
By reason of the foregoing, Caldwell and Smith violated and, unless enjoined, are
reasonably likely to continue to violate, Sections 5(a) and 5(c)
of the Securities Act [15 U.S.C §§
77e(a) and 77e( c)].
COUNT II
Violations of Section 17(a)(l) of the Securities Act
(As to Caldwell and Smith)
25. The Commission repeats and realleges Paragraphs 1 through 20 of its Complaint.
26. From April 2013 through August 2014, Caldwell and Smith, directly and
indirectly,
by use of the means or instruments of transportation or communication in interstate
commerce and by use
of the mails, in the offer or sale of securities, knowingly, or recklessly
employed devices, schemes or artifices to defraud.
8

27. By reason of the foregoing, Caldwell and Smith violated and, unless enjoined, are
reasonably likely to continue to violate Section 17(a)(l)
of the Securities Act [15 U.S.C. §
77q(a)(l)].
COUNT III
Violations of Section l 7(a)(2) of the Securities Act
(As to Caldwell and Smith)
28. The Commission repeats and realleges Paragraphs 1 through 20 of this Complaint.
29. From April 2013 through August 2014, Caldwell and Smith, directly and
indirectly, by use
of the means or instruments of transportation or communication in interstate
commerce and by the use
of the mails, in the offer or sale of securities negligently obtained
money or property by means
of untrue statements of material facts and omissions to state
material facts necessary
to make the statements made, in the light of the circumstances under
which they were made, not misleading
30. By reason
of the foregoing, Caldwell and Smith, violated and, unless enjoined, are
reasonably likely to continue to violate Sections l 7(a)(2) and l 7(a)(3)
of the Securities Act [ 15
U.S.C. § 77(q)(a)(2)].
COUNTIV
Violations of Section l 7(a)(3) of the Securities Act
(As to Caldwell and Smith)
31. The Commission repeats and realleges Paragraphs 1 through 20 of this Complaint.
32. From April 2013 through August 2014, Caldwell and Smith, directly and
indirectly, by use
of the means or instruments of transportation or communication in interstate
commerce and by the use
of the mails, in the offer or sale of securities negligently engaged in
9

transactions, practices and courses of business which operated as a fraud or deceit upon
purchasers
of such securities.
33. By reason
of the foregoing, Caldwell and Smith, violated and, unless enjoined, are
reasonably likely to continue to violate Section l 7(a)(3)
of the Securities Act [15 U.S.C. §
77( q)(a)(3)].
COUNTV
Violations of Section lO(b) of the Exchange Act and Exchange Act Rule 10b-5(a)
(As to Caldwell and Smith)
34. The Commission repeats and realleges Paragraphs I  through 20 of its Complaint.
35. From April, 2013 through August 2014, Caldwell and Smith, directly and
indirectly, by use
of any means or instrumentality of interstate commerce, and of the mails in
connection with the purchase
or sale of the securities, knowingly or recklessly employed devices,
schemes or artifices to defraud.
36. By reason
of the foregoing, Caldwell and Smith violated and, unless enjoined, are
reasonably likely to continue to violate Section lO(b)
of the Exchange Act[l5 U.S.C. §  78j(b),
and Rule 10b-5(a),
17 C.F.R. § 240.10b-5(a)].
COUNT VI
Violations
of Section l0(b) of the Exchange Act and Exchange Act Rule 10b-5(b)
(As to Caldwell and Smith)
3 7. The Commission repeats and realleges Paragraphs 1 through 20 of its Complaint.
38. From April 2013 through August 2014, Caldwell and Smith, directly and
indirectly, by use
of any means or instrumentality of interstate commerce, and of the mails in
connection with the purchase or sale
of the securities, knowingly or recklessly made untrue
10

statements
of
material
facts
and
omitted
to
state
material
facts
necessary
in
order
to
make
the
statements
made,
in
the
light
of
the
circumstances
under
which
they
were
made,
not
misleading.
39.
By
reason
of
the
foregoing,
Caldwell
and
Smith
violated
and,
unless
enjoined,
are
reasonably
likely
to
continue
to
violate
Section
l0(b)
of
the
Exchange
Act[15
U.S.C.
§
78j(b),
and
Rule
10b-5(b),
17
C.F.R.
§
240.10b-5(b)].
COUNT
VII
Violations
of
Section
lO(b)
of
the
Exchange
Act
and
Exchange
Act
Rule
10b-5(c)
(As
to
Caldwell
and
Smith)
40.
The
Commission
repeats
and
realleges
Paragraphs
1 through
20
of
its
Complaint.
41.
From
April
2013
through
August
2014,
Caldwell
and
Smith,
directly
and
indirectly,
by
use
of
any
means
or
instrumentality
of
interstate
commerce,
and
of
the
mails
in
connection
with
the
purchase
or
sale
of
the
securities,
knowingly
or
recklessly
engaged
in
acts,
practices
and
courses
of
business
which
operated
as
a  fraud
upon
the
purchasers
of
such
securities
and
will
operate
as
a fraud
upon
the
purchasers
of
such
securities.
42.
By
reason
of
the
foregoing,
Caldwell
and
Smith
violated
and,
unless
enjoined,
are
reasonably
likely
to
continue
to
violate
Section
I0(b)
of
the
Exchange
Act[15
U.S.C.
§
78j(b),
and
Rule
1 0b-5(c),
17
C.F.R.
§ 240.1
0b-5(c)].
COUNT
VIII
Violations
of
Section 206(1)
Advisers
Act
(As
to
Smith)
43.
The
Commission
repeats
and
realleges
Paragraphs
1 through
20
of
its
Complaint.
44.
At
all
relevant
times,
Smith,
for
compensation,
engaged
in
the
business
of
advising others
as
to
the
value
of
securities
or
as
to
the
advisability
of
investing
in,
purchasing,
11

or selling securities and was therefore an "investment adviser" within the meaning of Section
202(a)(l
l) of the Advisers Act [15 U.S.C. § 80b-2(a)(l l )].
45. Smith, by the use
of means and instruments of transportation and communication
in interstate commerce and by use
of the mails, directly and indirectly, knowingly or recklessly
employed devices, schemes and artifices to defraud one or more clients or prospective clients.
46. By engaging in this conduct, Smith, directly and iμdirectly, violated, and unless
enjoined, will continue
to violate Section 206(1) of the Advisers Act [15 U.S.C. § 80b-6(1)].
COUNTIX
Violations of Section 206(2) of the Advisers Act
(As to Smith)
4 7. The Commission repeats and realleges Paragraphs 1  through 20 and 44 of its
Complaint.
48. Smith, by the use
of the mails or any means or instrumentality of interstate
commerce, directly and indirectly, negligently engaged in transactions, practices, or courses
of
business which operated as a fraud or deceit upon one or more clients or prospective clients.
49. By reason
of the foregoing, Smith violated and, unless enjoined, is reasonably
likely
to continue to violate Section 206(2) of the Advisers Act [15 U.S.C.§ 80b-6(2)].
RELIEF REQUESTED
WHEREFORE,
the Commission respectfully requests that the Court find the
Defendants committed the violations alleged and:
12

I.
Permanent
Injunctive
Relief
Issue
permanent
injunctions
restraining
and
enjoining
Caldwell
and
Smith,
and
their
officers,
agents,
servants,
employees,
attorneys,
representatives,
and
all
persons
in
active
concert
or
participation
with
them,
and
each
of
them,
from
violating
Sections
5(a),
5(c),
and
17(a)
of
the
Securities
Act
[15
U.S.C.
§§
77e(a),  77e(c),
and
77q(a)]
and
Section
l0(b)
and
Rule
l0b-5
of
the
Exchange
Act
[15
U.S.C.
§
78j(b)
and
17
C.F.R.
§
240.I0b-5],
and
also,
with
respect
to
Smith,
from
violating
Sections
206(1)-(2)
of
the
Advisers
Act
[15
U.S.C.
§
80b-6(1)
and
80b-6(2)].
II.
Civil
Penalties
Issue
an
Order
directing
Caldwell
and
Smith
to
pay
civil
money
penalties
pursuant
to
Section
20(d)
of
the
Securities
Act[l5
U.S.C.
§  77t(d)],
and
Section
2l(d)(3)
of
the
Exchange
Act[l5
U.S.C.
§  78u(d)(3)],
and
also,
with
respect
to
Smith,
pursuant
to
Section
209(e)
of
the
Advisers
Act
[15
U.S.C.
§ 80b-9(e)].
III.
Disgorgement
Issue
an
Order
directing
Caldwell
and
Smith
to
disgorge
all
ill-gotten
gains,
including
prejudgment
interest,
resulting
from
the
acts
or
courses
of
conduct
alleged
in
this
Complaint.
IV.
Officer
and
Director
Bar
Issue
an
Order,
pursuant
to
Section
2l(d)(2)
of
the
Exchange
Act
[15
U.S.C.
§78u(d)(2)]
barring
Defendant
Caldwell
from
serving
as
an
officer
or
director
of
any
issuer
that
has
a class
of
securities
registered
pursuant
to
Section
12
of
the
Exchange
Act
[15
U.S.C.
§
781],
or
that
is
required
to
file
reports
pursuant
to
Section
15(d)
of
the
Exchange
Act
[15
U.S.C.
§78o(d)].
13

V.
Further Relief
Grant such other further relief as may be necessary and appropriate.
VI.
Retention of Jurisdiction
Further,  the Commission respectfully requests  that the Court retain jurisdiction over this
action in order to implemen t  and carry  out the  terms of all orders  and decrees  that may be
entered,  or
to entertain any suitable application or  motion by the Commission for additional
relief within the
jurisdiction of this Cou11.
DEMAND FOR JURY TRIAL
The Commission hereby demands trial by jury.
Respectfully submitted,
wu;u1o ~
WILFREDO FERNANDEZ, FL {JAR # 142859
TRIAL ATTORNEY
ANDRE ZAMORANO, FL BAR #967361
JACQUELINE M. O' REILLY, FL BAR #29326
SECURITIES AND EXCHANGE
COMMISSION
801 Brickell Avenue, Suite 1800
Miami, Florida 33131
Telep hone: (305) 982-6300
Facsimile (305) 536-4154
[email protected]
[email protected]
ore
[email protected]
14

ALEXANDER C. VAN HOOK
UNITED STATES ATTORNEY
WESTERN DISTRICT OF LOUISIANA
Isl Katherine W  Vincent
KATHERINEW. VINCENT#18717
Assistant United States Attorney
800 Lafayette Street, Suite 2200
Lafayette, Louisiana 70501-6832
Telephone: (33 7) 262-6618
Facsimile: (337) 262-6693
Katherine. [email protected]
15

UNITED STATES DISTRICT COURT 
DISTRICT OF WESTERN LOUISIANA 

SHREVEPORT DIVISION 

SECURITIES AND EXCHANGE COMMISSION, CASE NO. 

Plaintiff, 
VERSUS 

KIRBY JON HINES CALDWELL and 
GREGORY ALAN SMITH, 

Defendants, 

JUDGE 

MAGISTRATE JUDGE 

COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF 

Plaintiff Securities and Exchange Commission (the "Commission") alleges as follows: 

INTRODUCTION 

1. The Commission brings this action to enjoin Kirbyjon Hines Caldwell 

("Caldwell") and Gregory Alan Smith ("Smith") ( collectively "Defendants") from further 

violations of the registration and antifraud provisions of the federal securities laws by offering 

and selling participation rights in certain historical Chinese bonds (the "bonds") to mostly 

vulnerable and elderly investors, some of whom liquidated their annuities to invest in this 

scheme. 

2. Between approximately April 2013 and August 2014, Defendants raised at least 

$3,488,500 through a scheme to defraud approximately 29 investors through the fraudulent offer 

and sale of the bonds. Among other material misrepresentations and omissions, Defendants 

falsely represented to these investors that the bonds were safe, risk-free, worth tens, if not 

hundreds, of millions of dollars, and could be sold to third parties. In reality, the bonds were 

mere collectible memorabilia with no investment value. Both Caldwell and Smith exerted 

Case 5:18-cv-00434 Document 1 Filed 03/29/18 Page 1 of 15 PageID #: 1 



control and influence over the scheme, and offered credibility to the investment by, respectively, 

being a well-known pastor and claiming to be an investment adviser. 

3. Through their conduct, Caldwell and Smith violated Sections 5(a), 5(c), and l 7(a) 

of the Securities Act of 1933 ("Securities Act") [15 U.S.C. §§ 77e(a), 77e( c), and 77q(a)], and 

Section IO(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)], 

and Rule l0b-5 thereunder, [17 C.F.R. § 240.l0b-5]. Further, Smith violated Sections 206(1) 

and 206(2) of the Investment Advisers Act of 1940 ("Advisers Act") [15 U.S.C. §§ 80b-6(1) and 

80b-6(2)]. Unless the Court enjoins the Defendants, they are reasonably likely to continue to 

violate these provisions of the federal securities laws. 

DEFENDANTS 

4. Caldwell, age 64, is a resident of Houston, Texas. During the relevant period, 

Caldwell was the Senior Pastor at Windsor Village United Methodist Church (the "church"), one 

of the largest Protestant churches in the U.S. In the past, Caldwell has been a board member of 

various public companies, and he currently serves on the board of a company traded on the New 

York Stock Exchange. Caldwell also acted as a director to a mutual fund complex during the 

relevant time period. He and his wife are the co-owners of LDT, LLC ("LDT"), a Wyoming 

limited liability company which received and held investor funds. 

5. Smith, age 55, is a resident of Shreveport, Louisiana. Between December 1999 

and July 2010, Smith was associated with a registered broker-dealer. In July 2010, Smith was 

permanently barred from association with any FINRA member in any capacity, in part for 

commingling investor funds in his business account and for misappropriating investor funds. 

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JURISDICTION AND VENUE 

6. The Court has jurisdiction over this action pursuant to Sections 20(b ), 20( d)( I), 

and 22(a) of the Securities Act[l5 U.S.C. §§ 77t(b), 77t(d)(l), and 77v(a)]; Sections 2l(d) and 

27(a) of the Exchange Act [15 U.S.C. §§ 78u(d) and 78(a)]; and Section 209(d) and 214(a) of the 

Advisers Act [15 U.S.C. §§ 80b-9(d) and 80b-14(a)]. 

7. The Court has personal jurisdiction over the Defendants, and venue is proper in 

the Western District of Louisiana, because many of the Defendants' acts and transactions 

constituting violations of the federal securities laws occurred in the district. In addition, at all 

relevant times, Smith and the vast majority of the victims resided in the district. 

8. In connection with the conduct alleged in the Complaint, the Defendants, directly 

and indirectly, singly or in concert with others, made use of the means or instrumentalities of 

interstate commerce, the means or instruments of transportation or communication in interstate 

commerce, or the mails. 

FACTS 

A. Background and Mechanics of the Offering 

9. From at least April 2013 until August 2014, Caldwell and Smith offered and sold 

to at least 29 investors participation rights in various historical or Pre-revolutionary Chinese 

Bonds which Caldwell claimed to own, control, or possess. In some cases, Defendants told 

investors that their funds would be used to purchase the bonds. Smith, who worked as a 

financial planner, was responsible for finding investors for this offering. He did so by promising 

investors exorbitant returns. Smith also represented to many investors that he was an 

''investment adviser" with many years of prior experience assisting others with their investments 

and he advised these individuals concerning whether to invest in this scheme. 

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10. Smith was instrumental in securing investors for this scheme because he had 

longstanding ties to prospective investors and operated under the guise of an investment adviser 

with many years of experience advising clients on similar deals. In one case, Smith promised an 

investor that she would receive 15 times her original investment within 30 days and any funds 

she invested would be returned within 5 days of any demand for the funds. Smith also falsely 

told her that he (Smith) had personally invested $250,000 in the deal. 

11. Once an investor agreed to invest, Caldwell instructed the investor to wire transfer 

payment to either a bank account controlled by his attorney or an account in the name of LDT, a 

Wyoming limited liability company whose only members are Caldwell and his wife. 

Immediately after the investor sent the money, Caldwell would cause the funds to be transferred 

to personal accounts of Caldwell, Smith, or a Mexican business associate. 

B. The Material Misrepresentations and Omissions about the Bonds 

1. Background on Pre-Revolutionary Chinese Bonds 

12. Prior to the 1949 communist takeover in China, the former republic issued 

billions of dollars' worth of government bonds. These bonds have been in default since 1939 

and the current Chinese government refuses to recognize the debt. 

2. Material Misrepresentations and Omissions 

13. Smith successfully raised money for this offering by claiming the deal was 

available to only a few select individuals. Smith falsely told some investors that the money 

raised would be used to acquire more Chinese bonds. He repeatedly told investors that the bonds 

were "risk free," "guaranteed," and "safe" and that there were buyers lined up to purchase the 

bonds. Smith also told investors that the bonds would either be sold to a third party or redeemed 

by the Chinese government. Caldwell also made similar oral misrepresentations to several 

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investors about the safety of the investment, both before and after they invested. In fact, he even 

told one investor who invested approximately $800,000 that the bonds were backed by gold or 

silver. Both Smith and Caldwell told investors that the bonds were valuable and worth tens, if 

not hundreds, of millions of dollars. Neither disclosed that the bonds were in default and no 

liquid market for the bonds existed. Caldwell and Smith also never told investors they would use 

investor funds to pay for personal expenses. 

14. Although many investors did not understand the investment, they ultimately 

trusted Smith and took comfort in the fact that a high-profile pastor was offering the investment. 

Among other things, Smith falsely represented to investors that he too had invested in the bonds 

and that investors were guaranteed a return on investment which would be paid in less than one 

year. In one case he promised a return on investment in as little as 30 days. However, Smith 

failed to tell these investors that these bonds had already matured and had been in default for 

decades, or that they were not redeemable at all. Smith also failed to disclose that he was 

receiving compensation for recommending the investment to prospective investors. 

3. The Participation Agreements 

15. Once Smith found investors for the offering, Caldwell directed his attorney to 

draft a participation agreement containing the terms of the investment. The participation 

agreements, many signed by Caldwell, usually included the investment amount, a vague 

description of the bond, an exorbitant return on investment, a profit-sharing provision, depository 

bank information, and a "failure to close" option pursuant to which the investor could request his 

or her money back in the event Caldwell was unable to sell the bonds. Many of the participation 

agreements given to investors generally described the bonds as "historical Chinese Bonds" and 

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several of the agreements specifically identified the bonds as having a date before the Chinese 

communist revolution in 1949. 

16. Under the terms of the participation agreements, the investors' expectation of a 

return on their investment was based solely upon Caldwell's ability to sell the bonds to a third 

party purchaser. In fact, many of the participation agreements expressly stated that Caldwell was 

in control and possession of the bonds and that he planned to sell the bonds to third party 

purchasers. All investors invested money in a common enterprise with the expectation of profits 

solely from the efforts of the promoters or third parties. This offering was not registered with the 

Commission. Specifically, no registration statement was filed or in effect pursuant to the 

Securities Act with respect to the offering. Furthermore, most of the investors who invested in 

this scheme were not accredited and no exemption from registration was available. In fact, many 

were unsophisticated retirees who liquidated their annuities to invest in this scheme pursuant to 

Smith's advice. 

4. Lulling Emails and Texts 

17. Throughout 2014, Caldwell and Smith continued to send emails and texts 

promising investors that they would be paid. These lulling emails usually provided elaborate 

explanations for why Caldwell had been unable to sell the bonds. Excuses ranged from issues 

pertaining to international currency exchanges to failures of international organizations like the 

International Monetary Fund or the World Bank to approve the redemptions. Although these 

excuses sounded plausible to some investors, they had no basis in fact. 

18. In some emails Defendants promised that an alleged prospective buyer was 

interested in purchasing or redeeming the bonds, and that the deal would close within a short 

period of time. However, none of these deals ever transpired. 

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19. Caldwell also held frequent investor calls to explain the reasons for the delays. 

Smith and purported foreign intermediaries participated in these calls to provide further insight 

on the status of the sale of the bonds to third parties. Many investors received lulling emails and 

text messages from Caldwell or Smith. Some investors spoke directly with Caldwell about the 

failed deals. He repeatedly told them to remain faithful and that they would receive their money. 

Caldwell also used religious references in his lulling emails to give investors hope that they 

would soon be repaid. Finally, Caldwell sometimes used the alias "Turner Hines" when 

communicating with investors. 

20. Caldwell and Smith received approximately $760,000 and $1,000,000, 

respectively, of investor funds. LDT, controlled by Caldwell, also received approximately 

$1,000,000 of investor funds, approximately $175,000 of which was transferred to Caldwell. 

Offshore third parties, at least one in Mexico, received most of the remainder of the investor 

funds. Investor funds were comingled with other funds in Caldwell's and Smith's bank 

accounts. Caldwell and Smith used these accounts in part to pay for personal expenses, 

including mortgage payments in the case of Caldwell and luxury automobiles in the case of 

Smith. No investor to date has ever received any return on his or her investment. The great 

majority of investors have never even received their principal back. 

CLAIMS FOR RELIEF 

COUNTI 

Violations of Section S(a) and (c) of the Securities Act 
(As to Caldwell and Smith) 

21. The Commission repeats and realleges Paragraphs 1 through 20 of its Complaint. 

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22. No registration statement was filed or in effect with the Commission pursuant to 

the Securities Act with respect to the securities and transactions described in this Complaint and 

no exemption from registration existed with respect to these securities and transactions. 

23. From April 2013 through August 2014, Defendants, directly and indirectly: 

(a) Made use of means or instruments of transportation or communication in 
interstate commerce or of the mails to sell securities as described herein, 
through the use or medium of a prospectus or otherwise; 

(b) Carried securities or caused such securities, as described herein, to be 
carried through the mails or in interstate commerce, by any means or 
instruments of transportation, for the purpose of sale or delivery after sale; or 

(c) Made use of means or instruments of transportation or communication in 
interstate commerce or of the mails to offer to sell or offer to buy through the 
use or medium of a prospectus or otherwise, as described herein, without a 
registration statement having been filed or being in effect with the Commission 
as to such securities. 

24. By reason of the foregoing, Caldwell and Smith violated and, unless enjoined, are 

reasonably likely to continue to violate, Sections 5(a) and 5(c) of the Securities Act [15 U.S.C §§ 

77e(a) and 77e( c)]. 

COUNT II 

Violations of Section 17(a)(l) of the Securities Act 
(As to Caldwell and Smith) 

25. The Commission repeats and realleges Paragraphs 1 through 20 of its Complaint. 

26. From April 2013 through August 2014, Caldwell and Smith, directly and 

indirectly, by use of the means or instruments of transportation or communication in interstate 

commerce and by use of the mails, in the offer or sale of securities, knowingly, or recklessly 

employed devices, schemes or artifices to defraud. 

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27. By reason of the foregoing, Caldwell and Smith violated and, unless enjoined, are 

reasonably likely to continue to violate Section 17(a)(l) of the Securities Act [15 U.S.C. § 

77q(a)(l)]. 

COUNT III 

Violations of Section l 7(a)(2) of the Securities Act 
(As to Caldwell and Smith) 

28. The Commission repeats and realleges Paragraphs 1 through 20 of this Complaint. 

29. From April 2013 through August 2014, Caldwell and Smith, directly and 

indirectly, by use of the means or instruments of transportation or communication in interstate 

commerce and by the use of the mails, in the offer or sale of securities negligently obtained 

money or property by means of untrue statements of material facts and omissions to state 

material facts necessary to make the statements made, in the light of the circumstances under 

which they were made, not misleading 

30. By reason of the foregoing, Caldwell and Smith, violated and, unless enjoined, are 

reasonably likely to continue to violate Sections l 7(a)(2) and l 7(a)(3) of the Securities Act [ 15 

U.S.C. § 77(q)(a)(2)]. 

COUNTIV 

Violations of Section l 7(a)(3) of the Securities Act 
(As to Caldwell and Smith) 

31. The Commission repeats and realleges Paragraphs 1 through 20 of this Complaint. 

32. From April 2013 through August 2014, Caldwell and Smith, directly and 

indirectly, by use of the means or instruments of transportation or communication in interstate 

commerce and by the use of the mails, in the offer or sale of securities negligently engaged in 

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transactions, practices and courses of business which operated as a fraud or deceit upon 

purchasers of such securities. 

33. By reason of the foregoing, Caldwell and Smith, violated and, unless enjoined, are 

reasonably likely to continue to violate Section l 7(a)(3) of the Securities Act [15 U.S.C. § 

77( q)(a)(3)]. 

COUNTV 

Violations of Section lO(b) of the Exchange Act and Exchange Act Rule 10b-5(a) 
(As to Caldwell and Smith) 

34. The Commission repeats and realleges Paragraphs I through 20 of its Complaint. 

35. From April, 2013 through August 2014, Caldwell and Smith, directly and 

indirectly, by use of any means or instrumentality of interstate commerce, and of the mails in 

connection with the purchase or sale of the securities, knowingly or recklessly employed devices, 

schemes or artifices to defraud. 

36. By reason of the foregoing, Caldwell and Smith violated and, unless enjoined, are 

reasonably likely to continue to violate Section lO(b) of the Exchange Act[l5 U.S.C. § 78j(b), 

and Rule 10b-5(a), 17 C.F.R. § 240.10b-5(a)]. 

COUNT VI 

Violations of Section l0(b) of the Exchange Act and Exchange Act Rule 10b-5(b) 
(As to Caldwell and Smith) 

3 7. The Commission repeats and realleges Paragraphs 1 through 20 of its Complaint. 

38. From April 2013 through August 2014, Caldwell and Smith, directly and 

indirectly, by use of any means or instrumentality of interstate commerce, and of the mails in 

connection with the purchase or sale of the securities, knowingly or recklessly made untrue 

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statements of material facts and omitted to state material facts necessary in order to make the 

statements made, in the light of the circumstances under which they were made, not misleading. 

39. By reason of the foregoing, Caldwell and Smith violated and, unless enjoined, are 

reasonably likely to continue to violate Section l0(b) of the Exchange Act[15 U.S.C. § 78j(b), 

and Rule 10b-5(b), 17 C.F.R. § 240.10b-5(b)]. 

COUNT VII 

Violations of Section lO(b) of the Exchange Act and Exchange Act Rule 10b-5(c) 
(As to Caldwell and Smith) 

40. The Commission repeats and realleges Paragraphs 1 through 20 of its Complaint. 

41. From April 2013 through August 2014, Caldwell and Smith, directly and 

indirectly, by use of any means or instrumentality of interstate commerce, and of the mails in 

connection with the purchase or sale of the securities, knowingly or recklessly engaged in acts, 

practices and courses of business which operated as a fraud upon the purchasers of such 

securities and will operate as a fraud upon the purchasers of such securities. 

42. By reason of the foregoing, Caldwell and Smith violated and, unless enjoined, are 

reasonably likely to continue to violate Section I0(b) of the Exchange Act[15 U.S.C. § 78j(b), 

and Rule 1 0b-5(c), 17 C.F.R. § 240.1 0b-5(c)]. 

COUNT VIII 

Violations of Section 206(1) Advisers Act 
(As to Smith) 

43. The Commission repeats and realleges Paragraphs 1 through 20 of its Complaint. 

44. At all relevant times, Smith, for compensation, engaged in the business of 

advising others as to the value of securities or as to the advisability of investing in, purchasing, 

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or selling securities and was therefore an "investment adviser" within the meaning of Section 

202(a)(l l) of the Advisers Act [15 U.S.C. § 80b-2(a)(l l )]. 

45. Smith, by the use of means and instruments of transportation and communication 

in interstate commerce and by use of the mails, directly and indirectly, knowingly or recklessly 

employed devices, schemes and artifices to defraud one or more clients or prospective clients. 

46. By engaging in this conduct, Smith, directly and iµdirectly, violated, and unless 

enjoined, will continue to violate Section 206(1) of the Advisers Act [15 U.S.C. § 80b-6(1)]. 

COUNTIX 

Violations of Section 206(2) of the Advisers Act 
(As to Smith) 

4 7. The Commission repeats and realleges Paragraphs 1 through 20 and 44 of its 

Complaint. 

48. Smith, by the use of the mails or any means or instrumentality of interstate 

commerce, directly and indirectly, negligently engaged in transactions, practices, or courses of 

business which operated as a fraud or deceit upon one or more clients or prospective clients. 

49. By reason of the foregoing, Smith violated and, unless enjoined, is reasonably 

likely to continue to violate Section 206(2) of the Advisers Act [15 U.S.C.§ 80b-6(2)]. 

RELIEF REQUESTED 

WHEREFORE, the Commission respectfully requests that the Court find the 

Defendants committed the violations alleged and: 

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I. 

Permanent Injunctive Relief 

Issue permanent injunctions restraining and enjoining Caldwell and Smith, and their 

officers, agents, servants, employees, attorneys, representatives, and all persons in active concert 

or participation with them, and each of them, from violating Sections 5(a), 5(c), and 17(a) of the 

Securities Act [15 U.S.C. §§ 77e(a), 77e(c), and 77q(a)] and Section l0(b) and Rule l0b-5 of the 

Exchange Act [15 U.S.C. § 78j(b) and 17 C.F.R. § 240.I0b-5], and also, with respect to Smith, 

from violating Sections 206(1)-(2) of the Advisers Act [15 U.S.C. § 80b-6(1) and 80b-6(2)]. 

II. 

Civil Penalties 

Issue an Order directing Caldwell and Smith to pay civil money penalties pursuant to 

Section 20(d) of the Securities Act[l5 U.S.C. § 77t(d)], and Section 2l(d)(3) of the Exchange 

Act[l5 U.S.C. § 78u(d)(3)], and also, with respect to Smith, pursuant to Section 209(e) of the 

Advisers Act [15 U.S.C. § 80b-9(e)]. 

III. 

Disgorgement 

Issue an Order directing Caldwell and Smith to disgorge all ill-gotten gains, including 

prejudgment interest, resulting from the acts or courses of conduct alleged in this Complaint. 

IV. 

Officer and Director Bar 

Issue an Order, pursuant to Section 2l(d)(2) of the Exchange Act [15 U.S.C. §78u(d)(2)] 

barring Defendant Caldwell from serving as an officer or director of any issuer that has a class of 

securities registered pursuant to Section 12 of the Exchange Act [15 U.S.C. § 781], or that is 

required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. §78o(d)]. 

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V. 

Further Relief 

Grant such other further relief as may be necessary and appropriate. 

VI. 

Retention of Jurisdiction 

Further, the Commission respectfully requests that the Court retain jurisdiction over this 

action in order to implement and carry out the terms of all orders and decrees that may be 

entered, or to entertain any suitable application or motion by the Commission for add itional 

relief within the jurisdiction of this Cou11. 

DEMAND FOR JURY TRIAL 

The Commission hereby demands trial by jury. 

Respectfully submitted, 

wu;u1o ~ 
WILFREDO FERNANDEZ, FL {JAR # 142859 
TRIAL ATTORNEY 
ANDRE ZAMORANO, FL BAR #967361 
JACQUELINE M. O' REILLY, FL BAR #29326 
SECURITIES AND EXCHANGE 
COMMISSION 
801 Brickell Avenue, Suite 1800 
Miami, Florida 33131 
Telephone: (305) 982-6300 
Facsimile (305) 536-4154 
[email protected] 
[email protected] 
[email protected] 

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ALEXANDER C. VAN HOOK 
UNITED STATES ATTORNEY 
WESTERN DISTRICT OF LOUISIANA 

Isl Katherine W Vincent 
KATHERINEW. VINCENT#18717 
Assistant United States Attorney 
800 Lafayette Street, Suite 2200 
Lafayette, Louisiana 70501-6832 
Telephone: (33 7) 262-6618 
Facsimile: (337) 262-6693 
Katherine. [email protected] 

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	Doc 1 Complaint
	Doc 1-1 Civil Cover Sheet