SEC v. NORTH STAR FINANCE LLC; THOMAS G. ELLIS; YASUO ODA; THOMAS H. VETTER; MICHAEL K. MARTIN; SHARON L. SALINAS, et al., No. 8:15-cv-01339, District of Maryland (May 14, 2015) — Complaint

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
GREENBELT  DIVISION
SECURITIES  AND EXCHANGE
COMMISSION,
Plailltiff,
I'.
NORTH STAR FINANCE LLC,
1604 Ilopefieid Rd.
Silver Spring, MO 20905
Montgomery County,
THOMAS G. ELLIS,
1604 Ilopefield Rd.
Silver Spring, MD 20905
Montgomery County,
YASUO ODA,
10350 Swift Stream 1'1.,Apt. 207
Columbia, MD 21044
Howard County,
THOMAS H. VETTER,
6 Woodside Court
Danville, CA 94506,
MICHAEL K. MARTIN,
657 Lynn Shores Rd.
Virginia Beach, VA 23452,
SHARON L. SALINAS,
657 Lynn Shores Rd.
Virginia Beach, VA 23452.
CAI'IT AL SOURCE FUNDING LLC,
657 Lynn Shores Rd.
Virginia Beach, VA 23452, and
CAPITAL SOURCE LENDING LLC,
657 Lynn Shores Rd.
Virginia Beach, VA 23452,
Defelldallts,
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
Civil Action No.
Fit.'::']
US  O!STEiGI':O~;\T
CISTRICT OF hi\fr:LAtiJ
2015L'Y   II   Ari10:50
C\E~i\'"CFFICE
~T C.EE:CELT
By~l/DEPUTY
51::\15 CV 1339.

ami
Relief Defendants.
CHAREL WINSTON,
4767 Lonesome Dove Drive
Shingle Springs, CA 95682,
GOODWILL  FUNDING INC.,
4767 Lonesome Dove Drive
Shingle Springs, CA 95682, and
)
)
)
)
)
)
)
)
)
)
)
)
)
-----------)
COMPLAINT
Plaintiff Seeurities and Exehange Commission ("Commission")  alleges as follows:
SUMMARY
1.This ease involves a type of investment scam known as a "prime bank" li'aud.
These fraudulent schemes involve the purported issuance, trading, or use of financial instruments
affiliated with international banking institutions or other obscure sources.  Defendants who
conduct such schemes use technical-sounding  terms and phrases to cloak what in fact are
fictitious investment programs with an air oflegitimacy.   They prey on unsuspecting  investors,
promise extraordinary  returns for little risk, and expend considerable  effort in distracting
investors who seek delinitive answers regarding how their investments  are actually being used
and why the promised returns have not materialized.
2.From at least January 2013 until the present, Thomas G. Ellis and Yasuo Oda,
through their company, North Star Finance LLC ("North Star"), Thomas II. Vetter, and Michael
K. Martin and Sharon L. Salinas, through their companies, Capital Source Lending LLC and
Capital Source Funding LLC (collcctively,  the "Capital Source entities" or "Capital Source"),
engaged in a fraudulent "prime bank" scheme.  In furtherance of this scheme, Defendants lured
2

and assisted in luring investors into complicated-sounding  transaetions  involving bank
guarantees  and other financial instruments  that supposedly  could be "monetized"  to generate
millions of dollars.  Defendants claimed and assisted one another in claiming that these
extraordinary  returns would then be available to investors in the form of project funding on
highly favorable terms.  Since at least January 2013, North Star and Capital Source have
collected approximately  $5 million-  on information  and bclicf, all from defrauded  investors-
and several of the defendants  have used investors'  money to pay themselves  hundreds of
thousands  of dollars.
3.Defendants'  investment programs were completely  fictitious.  Defendants  neither
obtained nor "monetized"  international  bank instruments  to secure funding as promised.
Although at least one investor who threatened to report the scheme received a partial refund of
his invested funds, the returns promised by North Star and Capital Source were never realized.
4.Defendants  made numerous material misrepresentations  to investors in
furtherance of the "prime bank" schcme.  For example, Ellis, Vetter, and Martin repeatedly  lied
to investors about the existence of the supposed bank instrument  investments  and the use of
investor funds.  Ellis and Oda sent several emails in which they pressured  investors to sign
phony documents,  on the false pretenses that the investment program was both legitimate and
available for only a limited time.  Martin falsely told one of these investors that he had
personally  been involved in seven other transactions  in 2014 in which he had "seeured"  and
"monetized"  bank guarantees.  Salinas participated  in and aided and abetted the scheme by
establishing  bank accounts for Capital Source Funding, by falsely representing  herself to be an
eserow officer, and by signing at least one document that fraudulently  purported to be an escrow
agreement  for the safekeeping  of investor funds.
3

5.No transactions   in securities  offered  or sold by or for the Defendants  have becn
registered  with the Commission,   or are eligible  for an cxcmption   from rcgistration  with the
Commission.   Nor were any of the Defendants  registered  as broker-dealers,   as is required  for
offering  securities  to investors  in these circumstances,   which  several  of the Defendants  did.
6.By the conduct  described  herein,  Defendants  violated  the anti-fraud  and
registration  provisions  of the federal  securities  laws, and will continue  to violate  those  provisions
unless  restrained  or enjoined  by this Court.
JURISDICTION   AND VENUE
7.The Commission   brings  this action,  and this Court  has jurisdiction   over this
action,  pursuant  to authority  conferred  by Section  20(b)  and 22(a) of the Securities  Act [15
U.S.c.SS77t(b)  and 77v(a)]  and Sections  21(d),  21(e) and 27 of the Exchange  Act [15 U.S.c.
SS78u(d),  78u(e)  and 78aaj.
8.The Defendants,  directly  and indirectly,  made use of the means  and
instrumentalities   of interstate  commerce,  and the means  and instruments  of transportation   and
communication   in interstate  commerce,  in connection  with the transactions,   acts, practices,  and
courses  of business  alleged  in this Complaint,  certain  of which  occurred  within  the District  of
Maryland.
9.Venue  in this district  is proper  under Section  22(a) of the Securities  Act [15
U.S.c.S77v(a)]  and Section  27 of the Exchange  Act [15 U.S.c.S78aa]  because  each Defendant
engaged  in transactions,   acts, practices,  and courses  of business  constituting   the violations
alleged  in this Complaint,  certain  of which  occurred  within  the District  of Maryland,  including
specific  communications,   within  the District  of Maryland,  with investors  in furtherance  of the
fraudulent  conduct  alleged  herein.
4

IH:FENDANTS
10.North  Star  Finance  LLC  ("North  Star")  is a Maryland-based   limited  liability
company  with its principal  office  at Ellis's  home address  in Silver  Spring,  Maryland.   North  Star
offers  "project  funding"  in the building  industry  through  bank guarantee  transactions  and other
programs.   North  Star is not registered  with thc Commission  in any capacity.
II.Thomas   Ellis  is a resident  of Silver Spring,  Maryland  and a Senior  Partner  of
North  Star.  Ellis is not registercd  with the Commission  in any capacity.
12.Yasuo  Oda  is a rcsident  of Ellicott  City, Maryland  and a Senior  Partner  of North
Star.  He is also North  Star's  registered  agent.  Oda is not registered  with the Commission   in any
capacity.
13.Thomas   H. Vetter  is a residcnt  of Danville,  California.   Vctter  is not registered
with the Commission  in any capacity.
14.Michael  K. Martin   is a resident  of Virginia  Beach, Virginia.   He controls  the
Capital  Source entities,  and he is the registered  agent of Capital  Source  Lending  LLC.  Martin  is
not registered  with the Commission  in any capacity.
IS.Sharon   L. Salinas  is a resident  of Virginia  Beach,  Virginia.   Through  at least
March 20 IS, she served a number  of roles with the Capital  Source  entities,  including  as "VI'  of
Operations"  in Capital  Source  Lending  LLC's  "Compliance   Division,"  and she is the registered
agent of Capital  Source  Funding  LLC.  She is not registered  with the Commission  in any
capacity.
16.Capital   Source  Lending   LLC  is a limited  liability  company  based  in Virginia
Beach, Virginia,  with its principal  of1ice at Martin  and Salinas's  home address.   Capital  Source
Lending  LLC promotes  transactions  involving  bank  instruments  and "monetizing"   services.
5

17.Capital Source Funding LLCis a limited liability company basedinVirginia
Beach, Virginia, with its principal office at Martin and Salinas's  home address.  In the scheme
described herein, Capital Source Funding LLC purported to act as an escrow company and
"paymaster"  for Capital Source Lending LLC.
RELIEF DEFENDANTS
18.Goodwill Funding Inc.is an entity incorporated  in Florida with its principal
place of business in Shingle Springs, California.  Between September and December 2014,
Goodwill Funding, Inc. received at least $98,000 from Capital Source.
19.Charcl Winstonis a resident of Shingle Springs, California and is described on
Goodwill Funding Ine.'s website as its founder and president.  In November  2014, Winston
received at least $25,000 II'om Capital Source.
20.There is no evidence that the Relief Defendants provided any lawful services or
other value in return for these funds.
FACTS
I.    Background
21.From at least January 2013 to the present, Defendants used the mail and wires to
defraud investors by offering or selling fictitious investments  involving prime bank instruments,
including bank guarantees.  Bank account records for North Star and Capital Source reflect that
the fraud was both widespread and substantial:  Defendants appear to have received more than
$4.6 million in investor funds from over thirty investors.  On information and belieC these
investors are all located in the United States, and several have limited investment experience.
22.Ellis and Oda, through North Star, and Martin and Salinas, through Capital
Source, promoted their fi'audulent scheme through their respective websites on the internet.
6

Though the exact language varied from website to website and over time, the North Star and
Capital Source websites generally described vague and non-sensical processes, with complcx
terms, through which North Star and Capital Source would "escrow" investor money, and then
generate substantial funds that would be available to investors from the "monetization"  of bank
guarantees through well-known banks.
23.   In or about 2014, Ellis and Oda began promoting an investment program that
involved a North Star-Capital Source partnership,  According to North Star's website, under this
program, the "North Star Flex 13GLoan Program," Capital Source would obtain and "monetize"
a bank guarantee (the "13G" in the product's title) upon North Star's receipt of an investor's
refundable application fee. The profits from this monetization process then would be made
available by Capital Source to North Star, which would loan investors extraordinary amounts of
money, in some instances up to $100 million, on highly favorable terms.
24.   The investments offered by North Star and Capital Source are securities.  As
described more fully below, Ellis, Oda, Vetter, Martin, and Salinas encouraged, or aided and
abetted each other in encouraging, investors to complete bogus legal doeuments and purported
escrow agreements, and then to wire investment funds to accounts that one or more of the
Defendants controlled.  Investors were told that North Star and/or Capital Source would use
investor funds for costs incurred in "monetizing" bank instruments, and that this process would
pay fixed amounts on a specific future date,
25.   Among other things, investors also were led to believe that their investments were
being pooled into groups, that they would realize profits from the "monetization"  process in the
form of project funding on highly favorable terms, and that these profits were to come from the
efforts of North Star and/or Capital Source.
7

26.Prime bank investment programs such as those offered by Defendants are
fictitious.  Several government agencies, including the Commission.  the U.S. Department of the
Treasury, and the Federal Bureau oflnvestigation  (FBI), have posted investor alerts and
warnings about fictitious "prime bank" investments on their publicly available websites.  These
agencies warn that the bank instruments similar to those described in this Complaint, including
bank guarantees, arc frequently used in fraudulent investment schemes.  For example, the FBI
publicly warns investors that "[wJhile foreign banks usc instruments called 'bank guarantees'  in
the same manner that U.S. banks usc letters of credit to insure paymcnt for goods in international
trade,such bank guarantees  are never traded or sold on an)' kind o(market."
http://ww\v.lbi.gov/seams-safetv/fraud/fraud#pbnf(emphasis added).
27.Ellis, Oda, Vetter, Martin, and Salinas, and North Star and Capital Source knew
or were reckless in not knowing that their investment offerings were fictitious, that the
"monctization"  proccss was bogus, that the investor funds collected by NOIth Star and/or Capital
Source were not being used in the manner represented to investors, and that each of their
statements described herein were materially false or misleading or omitted to state material facts
which would make the statements he made not materially misleading.
II.The Scheme to Defraud
Tlte Illitial Lllre:  Ellis al/(I Vetter Pramise  Milliolls  of DOl/llrS ill Fillallcillg  to Members  of
tlte NatiOlllll Association  of Homeblli/ders
28.The National Association of Homebuilders  (NAI IE) is a trade association that
promotes the interests of homebuilders  and the residential building industry.  According its
website, the NAHB represents more than 140,000 members.  In February 2014, the NAHB hcld
its annual meeting in Las Vegas, Nevada.
8

29.Ellis, on behalf of North Star, attended the NAHI3's annual meeting as a guest
speaker and gave a presentation on a purported financing opportunity  for homebuilders.  Vetter,
who was a member of the NAHI3 Board of Directors and a participant on several NAHS
committees,  accompanied and introduced Ellis to NAHI3 mcmbers at the meeting.
30.In his presentation,  Ellis described a risk-free way for NAJ-I13members to secure
millions of dollars' worth of financing for rcal cstate projects through North Star at highly
favorable rates. To take advantage of this program, homebuilders  were instructed to wire a
refundablc "application  fee" to North Star, which would be held safely in eserow.
31.A number ofNAHI3 members believed the North Star program to be legitimate
because Ellis's presentation was made at the NAHB meeting, with an introduction by Vetter.  In
the two months following Ellis's presentation,  several NAHI3 members applied for the program
by wiring hundreds of thousands of dollars' worth of application fees to North Star.
32.For example, Investor A.H. attended Ellis's presentation at the NAHI3 meeting.
On February 20, 2014, Investor A.ll. applied for $4.8 million in project funding by wiring a
$30,000 application fee to North Star.
33.Ellis told Investor A.ll. that his application  fee would be held safely in an escrow
account.  Ellis also supplied Investor A.H. with a "Lender Cover Sheet" that ostensibly detailed
the terms of the application.  According to this document, Investor A.H.'s $30,000 payment
would be used to cover miscellaneous  processing costs but was refundable "[s ]hould there be
non-performance  by North Star Finance."
34.Contrary to Ellis's representations,  North Star did not place Investor A.H.'s
$30,000 in an escrow account.  In fact, in the week following North Star's receipt of Investor
9

A.H.'s $30,000 application fee, North Star transferred $2,000 directly to Ellis, $10,000 directly
to Vetter, and $16,000 directly to ada.
35.   Vetter made additional false representations to Investor A.H. regarding the
legitimacy of the North Star program. For example:
•  Vetter told Investor A.1-1.that the program was being funded by a group of seven
(7) U.S. billionaire investors. This was not true. In reality, the program that Ellis
described and Vetter promoted was fictitious.
•  Vetter told Investor A.H. that he (Vetter) was not gaining financially from his role
in promoting the North Star program. This was not true. As alleged above, North
Star paid Vetter $10,000 within a week of its receipt of Investor A.H.'s
application fee. In total, North Star has paid Vetter at least approximately
$140,000 in transaction-based compensation.
36.   In the months that followed, Ellis and VelteI' repeatedly assured Investor A.H. that
funding for his loan was expected imminently. When the funding did not materialize, Ellis and
Vetter provided vague excuses for the repeated delays.
Tlte Bait
&Switclt:  Defelldallts COllvillce NAIIB  If/embers to Illvest ill tlte "Nortlt Star Flex
BG Loall Prog/'{/m," a Prime Balik F/,{/Ild
37.   Having primed a number of investors for the imminent receipt of funding-
funding that never actually materialized  Ellis, Vetter, ada, and Martin, assisted by Salinas,
then promoted the fraudulent prime bank investment program with Capital Source.
38.   On or about July 24, 2014, Ellis sent Investor A.H. an email describing a new
funding program. In thc cmail, Ellis told Investor A.H. that, to obtain project funding, Investor
A.H. should scnd an additional $75,000 to an escrow account. Ellis's email explained that
$15,000 of this additional $75,000 payment would be used for various "processing" costs, and
the remainder would be held in escrow until "validation of the instrument." Once Investor A.H.
sentthc rcquired funds, Ellis's cmail statcd that a "[blank instrument" would be "cut from a
"Top 25 Bank." Thc "bank instrumcnt" would thcn bc "monctized" and $4.8 million in funds
10

-

sent to "Capital  Source Lending's  account."   These funds would then be available  to Investor
A.H. on highly favorable  terms.  To further bait Investor A.B., Ellis falsely claimed that this new
arrangement  ultimately  would save Investor  A.H. substantial  costs and thus be more
economically  advantageous.
39.Ellis allached a purported  escrow agreement  with Capital Source Funding  for
Investor A.H. to complete  in connection  with the "bank instrument"  program.  The escrow
agreement  contained  instructions  for Investor A.H. to wire $75,000 to a "Capital  Source Funding
Escrow Account"  at Wells Fargo Bank, as well as signature  lines for both Investor A.B. and for
"Sharon  Salinas (Federal  Agent Ret)" on behalf of Capital Source Funding.
40.In the weeks that followed, through oral and email communications,  Ellis, Veller,
Oda and Martin encouraged  investors,  including  Investor A.B., to participate  in the bank
instrument  program.  Individually  and in combination  with one another,  Ellis, Veller, Oda and
Mm1in answered questions  about the program,  supplied  bogus documents,  including  purported
'"escrow" and "participation"  agreements,  and pressured  investors to part with their money.
41.For example,  in telephone  calls, Ellis and Veller told Investor A.H. that his
additional  $75,000 would only be required  for a very short time because Capital Source would
close the bank guarantee  transaction  within 2-3 weeks'  time.
42.These statements  were false.  Ellis and Veller knew or were reckless  in not
knowing  that their representations  materially  misrepresented  how Investor A.ll.' s money would
be used and omilled the material  fact that none of the money would actually  be used to close a
bank guarantee  transaction,  which itself was fictitious.
I I

43.Ellis and Vetter also encouraged  Investor A.H. to come up with the money in any
way possible, and suggested that Investor A.I-I. should borrow money from his family and repay
the amount as soon as the loan funds became available.
44.Similarly, Martin hosted a conference call with Investor A.II. and other investors
to explain the "bank instrument" program.  In this call, Martin explained to a number of
investors, including Investor A.II., how he would secure and monetize the bank guarantee.
Martin also told the investors that he had successfully completed seven other transactions  in
2014.
45.These statements were false. Martin knew or was reckless in not knowing that his
representations  materially misrepresented  how investor money would be used and omitted the
material fact that none of the investors'  monies would actually be used to secure and monetize a
bank guarantee.  Martin also knew or was reckless in not knowing that he had not successfully
completed seven other such transactions.
46.In an August 4, 2014 email, Ellis employed vague and complex terms to answer
Investor A.H.'s questions about a bogus "participation  agreement."  Ellis falsely told Investor
A.II., "we have 8 deals funding.  So we have been working our butt off to get everyone funded."
47.In an August 6, 2014 email, ada sent InvestorA.II.  what purported to be a
"revised" participation agreement.  ada pressured Investor A.II. to apply for the investment
program, stating that "expiration"  was on August I I, 2014.
48.In an August 1I, 2014 email, ada told InvestorA.II.,  "I still need to receive
signed escrow agreement.  Attached again.  Without it I can not send participation  agreement for
process [sic]."
12

49.Oda kncw or was recklcss in not knowing that his emails to Investor A.H.
materially misrcprescntcd  thc legitimacy ofthc  invcstmcnt program promotcd by North Star, and
omiltcd the matcrial facts that thc referenccd documcnts were bogus and that Investor A.II. 's
moncy actually would not bc sccurely held in an cscrow account.
50.On August 12,2014,  Ellis emailcd Invcstor A.H. a ncw "cscrow agrccment"  on
Capital Source Funding's  Icltcrhcad.  When Invcstor A.H. asked how this cscrow agreement
diffcrcd from an carlicr version, Ellis replied that "[floI' compliancc rcasons, thc cscrow has to be
on Capital Sourcc Funding Lcltcr I-Iead. Homeland Sccurity requircs this to be able to trace the
moncy. "
51.Ellis knew or was recklcss in not knowing that his answer to Invcstor A.H.
matcrially misrepresented  thc Icgitimacy of the investmcnt program and omilted the material
facts that the document was bogus and that Investor A.I I.'s moncy actually would not bc held
securcly in an cscrow account.
52.Investor A.I-I. also spccifically  inquired aboutthc  rolc of Sharon Salinas, who was
listed as an "escrow officer" on the Capital Source cscrow agrccmcnt.
53.    On or about August 13,2014,  Vclter assurcd Invcstor A.H. that Salinas was
Mal1in's wife and an employee working for Martin.  Vellcr furlhcr assurcd Investor A.H. that
Wells Fargo, not Salinas, would be acting as thc escrow agcnt holding Invcstor A.H.'s moncy.
54.    On August 14,2014,  Investor A.I-I. signed thc purportcd cscrow agrecment.
55.    On August 15, 2014, Salinas countcrsigned  thc purportcd cscrow agreemcnt as
the "CEO" of "Capital Sourcc Funding Escrow."  According to this documcnt, twenty pcrcent of
Invcstor A.H.'s $75,000 "will be used right away for the cost of processing, undcrwriting,  legal
fccs, issuance ofloan  documcnts, commissions,  wircs selting up account ofthc  instrument,"  with
13

the balance  of Investor  A.ll.'s   $75,000  held  safely  in escrow.   The  purported  escrow  agreement
flllther  provided  that, oncc  the "instrument   has been  validated  as real and obtained,  balance  of
cscrow  will be earned  and  will be called  to wire to Capital  Sourcc  Lending."
56.On August  18,2014,   Investor  A.H.  caused  $75,000  to be wired  to what he
believed  to be Capital  Source  Funding's   escrow  account.
57.Bank  records  for Capital  Source  show  that,  in reality,  Capital  Source  did not  use
and  maintain  Investor  A.H.'s  money  in the manner  that  Salinas  represented   in the escrow
agreement.    On the same  day  it received  Investor  A.H.'s  money,  Capital  Source  caused  $65,000
to be wired  to an individual  believed  to be in Canada.   There  is no evidence  that  this  individual
or anyone  else actually  used  Investor  A.H.'s  money  "for  the cost  of processing,   underwriting,
legal  fees,  issuance  of loan documents,   commissions,   [or] wires  setting  up account  of the
instrument."
58.A number  of other  homebuilders   and  NAI IB members  also  invested  in
Defendants'   fraudulent  bank  guarantee  program.   Based  on a review  of bank  records,  it appears
that North  Star and  Capital  Source  together  collected  at least  approximately   $2.4  million  from
such  investors  between  February  2014  and  April  2015.
59.There  is no evidence  that  any  investor  money  was  used  to acquire,  "monetize:'    or
otherwise  use any  purported  bank  instruments   in any  legitimate  transaction.
60.Bank  records,  however,  renect  that North  Star and  Capital  Source  paid  substantial
monies  directly  to several  of the Defendants.    For example,  since  February  2014,  North  Star  has
paid Ellis,  Oda, and  Vetter  approximately   $528,000,  $420,000,  and  $140,000,  respectively.
14

HalOillgFralldlllell/(l' Collec/ed SlIbs/all/iallm'es/ar  Fllllds, Defelldallts Fabricated Excllses
al/{IDelays to Explaill the Failllre of Promised Flllldillg to Materialize
61.Upon receiving invcstors'  money, Ellis and Martin deceived investors about the
status of their purported investments.
62.Ellis sent numcrous emails to Investor A.H. and other investors in the "bank
instrumcnt"' investment program in which he provided phony updates, blamcd delays on
fictitious bank processes, and admonished  investors for asking detailed questions about the status
of their investments.
63.For example, on September  17, 2014, Ellis sent an email to a group of investors
that he referred to as "Group One," which, on information and belief, ineluded Investor A.H. and
four other investors.  With the re: line "Update,"  Ellis stated [punctuation and syntax as per
original):
The banks are what we call "Bank to Bank" which means that one banker makes a
call to the other banker.  Once that happens then monies are released.  This is their
verification process that the buyer of the instrument has his money in the assigncd
account to purchase the BG [bank guarantee) from us.
The bank to bank call to happen can take one day up to 3 days. They arc not only
dealing with us but other clients.
There is nothing else we can do to push the process but wait. I asked cach and
everyone of you to wait until we receive word with can be any hour from now.
We will notify Bill our attorney and send an cmail out to each of you once we
reccive word.
64.In another "Update" email to investors, on October 7, 2014, Ellis stated
[punctuation and syntax as per original):
Guys,
The Bank Instrument has been sold which is great news. The buyer who
purchased the instrumcnt from us has asked for a minor / small change to the
procedure.  Mike [Martin) is working on that tomorrow morning with the clearing
house and thcn the money /lows.
15

Please: No phone calls as I have to keep all of my lines open for Mike in case he
needs something not to mention working on Group 2 with Bill our attorney.  I will
send out another update tomorrow in the afternoon once we hear from the clearing
house.
65.    On October 24,2014,  Ellis and Martin jointly provided a telephonic update to
Investor A.l1. In this call, Martin stated that both he and Ellis had invested their own money in
the transaction.  Martin and Ellis also offered further explanations for the delay, and they
confirmed that they were working together:
MARTIN:  ... I've spent money, TomlEllis]  has spent money.  We have spent
more money than you have put into this thing. So you know, there's no option to
fail here. I've got over $1 million of my own money into this.
****
MARTIN:  There are delays.  We have those delays and a few things like that but
I've got four good buyers that have already been vetted and ready to go. I've got
one right now, they just sent me a return sheet for $5 billion. They're ready to
take this thing down. So you know, when Tom [Ellis] says it's time, that's the
way I get it. When my buyer says, listen, we're ready to go and send my email--
sends an email to my attorney going we arc RWA, ready, willing and able to take
this thing down and they send me RWA. If they don't complete this thing I can
turn them over to Interpol.
INVESTOR A.H.: Right.
ELLIS: And [Investor A.lI.], every email I send out, prior to me sending out that
email I read it back to Mike [Martin].  Am I correct, Mike?
MARTIN:  Yes, you do.
66.    Martin and Ellis knew or were reckless in not knowing that there was no bank
instrument or guarantee, and that their status updates and representations were materially false or
misleading or omitted to state material facts which would make the statements they made not
materially misleading.
16

Defelldallts COlltillue to Deceive I111'estors
67.Since early 2015, Ellis and Oda, on behalfofNorth   Star, have told several
investors that were awaiting results that North Star was going to secure and monetize its own
bank instruments, without the involvement of Capital Source Lending, and planned to continue
to do so in the future.
68.For example, in an email to an invcstor on April 27, 2015, Ellis stated that he had
just spoken to his "Rep
IMonetizer" and that the "final forms were signed."  Ellis falsely
represented that thc "ncxt step is the 'template'  to do this I3G but also future I3G's:' and that this
"will also mcan the proccss in the future will be in place, run smooth, and cut down the funding
times .... North Star plans to be funding alot of projects this year and years to come."
69.Although at least one investor, Investor A.lI., has received a partial refund of his
investment following repeated demands, other investors continue to await the proceeds of their
investments or of refunds of the amounts that they invested with Defendants.
Defelldallts Have Beell Ellgagillg ill Fraudulellt "Prime Balik" Sc"emes
Sillce at Least 2013
70.Martin, through Capital Source, and aided and abetted by Salinas, has promoted
fraudulcnt bank instrumcnt transactions  since at least 2013.
71.For example, in Junc 2013, Martin, through Capital Sourcc Lcnding, cntercd into
a "Fee Agrecment"  with an investor whereby, for a $400,000 advancc fcc, Martin fraudulently
promised to secure a "leased SBLC" [Standy-By Lettcr of Creditl valued at €300 million.  The
investor wired $400,000 to Martin.
72.    The investor has not rcceivcd any return on his investment and thc $400,000
advancc fcc was ncver rcturned.  Bank records show that approximately  $218,000 or thc
17

investor's   funds  were transferred  to a third  party,  and that  Martin  and  Salinas  spent  the remaining
funds on luxury  car payments  and  miscellaneous   living expenses.
73.In February  2014,  law enforcement   authorities  in California  arrested  Martin's
investor,  alleging  that  he had  stolen  the money  that  he had wired  to Martin  for investment
purposes.   [n connection   with that  investigation,   law enforcement   authorities  obtained  freezes  on
certain  Wells  Fargo  bank  accounts  belonging  to Capital  Source  Lending  and  Martin.
74.Approximately   three  weeks  later,  in February  2014,  Salinas  incorporated   Capital
Source  Funding  LLC.   Salinas  then  opened  several  bank  accounts  under  its name,  with her as the
only  signer.   By doing  so, Salinas  enabled  Mat1in and  Capital  Source  to operate  outside  the scope
of the asset  freeze  and otherwise  enabled  the fraudulent  scheme  to continue.
III.Alleg;ations  Relating;  To  Relief  Defendants
75.Between  September  and  December  2014,  Goodwill  Funding  Inc. and  Charel
Winston  received  at least  $123,000  from  Capital  Source,  in the manner  set forth  below:
•Between  September  and  December  2014,  Salinas,  on behalf  of Capital  Source,
signed  checks  payable  to Goodwill  Funding  Inc. totaling  approximately   $98,000,
and
•In November  2014,  Salinas,  on behalf  of Capital  Source,  signed  a check  payable
to Winston  in the amount  01'$25,000.
76.On information  and  belief~ the funds  received  by the Relief  Defendants  came  out
of a Capital  Source  account  that  collected  funds  from  investors  who  sought  to participate  in
investment  programs  such  as those  described  above.
77.There  is no evidence  that  the Relief  Defendants  provided  any  lawful  services  or
other  value  in return  for these  funds.
18

COUNT ONE
Violation of Exchange Act Section 1O(b) and Rule IOb-5
(North Star, Ellis, Oda, Martin, and the Capital Source entities)
78.   The Commission realleges and incorporates herein by reference paragraphs I
through 777 above.
79.   Defendants N0I1h Star, Ellis, Oda, Martin, and the Capital Source entities, directly
and indirectly, with scienter, by use of the means or instrumentalities of interstate commerce, or
of the mails, employed devices. schemes or artifices to defraud; made untrue statements of
materia! fact or omitted to state material facts necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading; and engaged in acts,
practices or courses of business which have been and are operating as a fraud or deceit upon the
purchasers or sellers of securities.
80.   By reason of the foregoing, Defendants North Star, Ellis, Oda, Martin, and the
Capital Source entities have violated and, unless restrained and enjoined, will continue to violate
Exchange Act Section 10(b) [15 U.S.C.
S78j(b)] and Rule IOb-5 [17 C.F.R.S240.IOb-5].
COUNT TWO
Aiding and Abetting Violations of Exchange Act Section IO(b) and Rule 10b-5
(North Star, Ellis, Oda, Vetter, Martin, and Salinas)
81.   The Commission rcalieges and incorporates herein by reference paragraphs I
through 800 above.
82.   Pursuant to Exchange Act Section 20(e) [15 U.S.C.
S78t(e)], Ellis, Oda, Vetter,
Martin, and Salinas knowingly or recklessly aided and abetted North Star and, unless restrained
and enjoined, will continue to aid and abet North Star by providing substantial assistance in
19

furtherance  ofNorlh   Star's  violations  of Exchange  Act Section  10(b) [15 U.S.C.    78j(b)]  and
Rule  10b-5 [17 C.F.R.240.1 Ob-5J.
83.Furlhermore,  North  Star, Ellis, Oda, Vetter, Mat1in, and Salinas  knowingly  or
recklessly  aided and abetted  the Capital  Source entities  and, unless restrained  and enjoined,  will
continue  to aid and abet the Capital  Source  entities  by providing  substantial  assistance  in
furtherance  of Capital  Source's  violations  of Exchange  Act Section  IO(b) [I5  U.S.c.78j(b)]
and Rule  IOb-5 [17 C.F.R.    240.1 Ob-5].
COUNTTHREE
Violationof Securities  Act Section  17(a)
(North  Star, Ellis, Oda,  Martin,  and the Capital  Source entities)
84.The Commission  rea lieges and incorporates  herein  by reference  paragraphs   I
through  83 above.
85.North  Star, Ellis, Oda, Martin,  and the Capital  Sourcc entities,  directly  or
indirectly.  in the offer or sale of securities,  by the use of the means or instruments  of
transporlation  or communication   in interstate  commerce  or by the use of the mails:  (a) has
employed,  is employing,  or is about to employ  devices,  schcmes  or artifices  to defraud;  (b) has
obtained,  is obtaining  or is aboulto   obtain  money  or property  by means of untrue statements  of
material  fact and omissions  to state material  facts necessary  in order to make the statements
made, in light of the circumstances   under which  they were made, not misleading;  and (c) has
engaged,  is engaged,  or is about to engage  in transactions,  acts, practices  and courses  of business
that operated  or would operate  as a fraud upon purchasers  of securities.
86.By reason of the foregoing,  North  Star, Ellis, Oda, Martin,  and the Capital  Source
entities  have violated  and, unless  restrained  and enjoined,  will continue  to violate  Securities  Act
Section  17(a) [15 U.S.c.77q(a)].
20

~
~
~
~
~

COUNT FOUR
Aiding and Abetting Violations of Securities Act Section17(a)
(North Star, Ellis, ada,  Vcttcr, Martin, and Salinas)
87.    Thc Commission  rcallcgcs and incorporates herein by refcrcnce paragraphsI
through 86 above.
88.Pursuant to Sccurities Act Section 15(b) [15 U.S.c.   77o(b)], Ellis, ada.  Vetter,
Martin, and Salinas knowingly or recklessly aided and abetted, and, unless rcstrained and
enjoined, will continue to aid and abet North Star by providing substantial assistance in
furtherance of North Star's violations of Securities Act Section 17(a)
r15 U.S.c.   77q(a)].
89.Furthel1110re,North Star, Ellis, ada, Vetter, Martin, and Salinas knowingly or
recklessly aided and abettcd, and unless restrained and enjoined, will continue to aid and abet,
the Capital Sourcc entities by providing substantial assistance in furtherance of Capital Source's
violations of Securities Act Section 17(a) [15 U.S.c.   77q(a)].
COUNT  FIVE
Violation of Securities Act Section5
(North Star, Ellis, ada,  Martin, Salinas, and the Capital Source entitics)
90.    The Commission  realleges and incorporates hcrein by rcfcrcnce paragraphs
I
through 89 above.
91.Defendants N0I1h Star, Ellis, ada, Martin, Salinas and the Capital Sourcc entities,
directly or indirectly, made use of the means or instruments oftransportationor   communication
in interstate commerce or of the mails to offer and sell securities through the use or medium of a
prospectus or otherwise, and carried or caused to be carried through the mails or in interstate
commerce, such securities for the purpose of sale or for delivery after sale, when no registration
21

~
~
~

statement  had been filed or was in effect as to such securities  and no legally recognized
cxcmption  from registration  applied.
92.By reason of the foregoing,  Dcfendants  North Star, Ellis, ada,  Martin, Salinas
and the Capital Source entities  violated and, unless restrained  and enjoined,  will continue to
violate Securities Act Sections  5(a) and (c) [15 U.S.c.
S77e(a) and (c)].
COUNT  SIX
Aiding  and  Abetting  Violations  of Securities  Act Section  5(a) and  5(e)
(Ellis, Oda, Martin, and Salinas)
93.The Commission  realleges  and incorporates  herein by reference  paragraphs  I
through 922 above.
94.Pursuant to Securities  Act Section  15(b) [15 U.S.c.
S77o(b)],  Ellis, ada,  Martin,
and Salinas knowingly  or recklessly  aided and abetted the Capital Source entities'  and/or North
Star's  offer and sale of unregistered  securities  and, unless restrained  and enjoined,  will continue
to aid and abet the Capital Source entities and/or North Star by providing  them with substantial
assistance  in furtherance  of their violations  of Securities  Act Sections 5(a) and (c) [15 U.S.c.
S
77e(a) and 77e(c)].
COUNT  SEVEN
Violatioll  of Exchange  Act Section  15(a)
(Ellis, ada,  Vetter, and Martin)
95.The Commission  rea lieges and incorporates  herein by reference  paragraphs  1
through 94 above.
96.Ellis, ada,  Vetter, and Martin, while acting as brokers or dealers, made use of the
mails or any means or instrumentality  of interstate  commerce  to effeet transactions  in, or to
22

induce  or attempt  to induce  the purchase  or sale of, securities  without  being  registered  with the
Commission   as a broker  or dealer  or an associated  person  of a registered  broker-dealer.
97.By reason  of the foregoing,  Ellis,  Oda,  Vetter,  and  Martin  violated  and,  unless
restrained  and  enjoined,  will continue  to violate  Exchange  Act  Section   15(a) [15 U.S.c.
9
780(a»).
CLAIM AGAINST  RELIEF DF:FF:NDANTS
98.The  Commission   realleges  and  incorporates   herein  by reference  paragraphs   I
through  97 above.
99.Goodwill  Funding  Inc. and  Winston  received,  directly  or indirectly,  filllds and/or
other  benefits  from one or more  of the  Defendants  which  are the proceeds  of unlawful  activities
alleged  in this  Complaint  and to which  these  Relief  Defendants   have  no legitimate  claim.
I'RA YER FOR RELIEF
WHEREFORE,
the Commission   respectfully  requests  that  the Court:
I.
Enter judgment   in favor of the Commission   finding  that  the  Defendants   violated  the
federal  securities  laws  and  Commission   rules alleged  against  them  in this  Complaint;
II.
Permanently   enjoin  the  Defendants  from  further  violations  of the  federal  securities  laws
and  Commission   rules  alleged  in this Complaint;
III.
Permanently   enjoin  the Defendants  from directly  or indirectly  participating   in the
issuance,  offer,  or sale of any  security.  including  but not  limited  to bank  guarantees,   irrevocable
bank  undertaking   letters, joint  venture  agreements,   proofs  of funds,  medium  term  notes,  standby
23

•
leiters  of credit,  and  similar  instruments,   with the exception  of the  purchase  or sale of securities
listed  on a national  securities  exchange;
IV.
Order  all Defendants  and  Relief  Defendants  to disgorge,  as the Court  may  direct,  all ill-
gotten  gains  received  or benefits  in any  form derived  from the  illegal  conduct  alleged  in this
Complaint,   together  with  pre-judgment   interest  thereon;
V.
Order  all  Defendants  to pay civil  monetary  penalties  pursuant  to Securities  Act  Section
20(d)  [15 U.S.C.
S77t(d)]  and  Exchange  Act  Section  21(d)(3)  [15 U.S.c.S78u(d)(3)];  and
VI.
Grant  such  other  equitable  and  legal  relief  as may  be appropriate   or necessary  for the
benefit  of investors  pursuant  to Exchange  Act  Section  21(d)(5)  [I5  U.S.C.
S78u(d)(5)].
,JURY  DEMAND
The  Commission   demands  a trial  by jury  on all issues  so triable.
Date:   May  8, 2015
24
By:
Mt~~J)Jb
Matthew  1'. Cohen
Stephen  W. Simpson
Timothy  N. England
Counsel  for Plaintiff
U.S.  Securities  and  Exchange  Commission
100 F Street,  N .E.
Washington,   DC 20549
Fax:  202.772.9228
eohenma0Jsee.gov    / Tel.  202.551.7276
simpsons0Jsec.gov    /  Tel.  202.551.4513
englandt0Jsee.gov/  Tel.  202.551.4959

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

GREENBELT DIVISION

SECURITIES AND EXCHANGE
COMMISSION,

Plailltiff,
I'.

NORTH STAR FINANCE LLC,
1604 Ilopefieid Rd.
Silver Spring, MO 20905
Montgomery County,

THOMAS G. ELLIS,
1604 Ilopefield Rd.
Silver Spring, MD 20905
Montgomery County,

YASUO ODA,
10350 Swift Stream 1'1.,Apt. 207
Columbia, MD 21044
Howard County,

THOMAS H. VETTER,
6 Woodside Court
Danville, CA 94506,

MICHAEL K. MARTIN,
657 Lynn Shores Rd.
Virginia Beach, VA 23452,

SHARON L. SALINAS,
657 Lynn Shores Rd.
Virginia Beach, VA 23452.

CAI'IT AL SOURCE FUNDING LLC,
657 Lynn Shores Rd.
Virginia Beach, VA 23452, and

CAPITAL SOURCE LENDING LLC,
657 Lynn Shores Rd.
Virginia Beach, VA 23452,

Defelldallts,

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

Civil Action No.

Fit.'::']
US O!STEiG I ':O~;\T

CISTRICT OF hi\fr:LAtiJ

2015L'Y II Ari 10:50
C\ E~i\'" CFFICE
~TC.EE :CELT

By~l/ DEPUTY

51::\ 15 CV 1339.

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 1 of 24 



ami

Relief Defendants.

CHAREL WINSTON,
4767 Lonesome Dove Drive
Shingle Springs, CA 95682,

GOODWILL FUNDING INC.,
4767 Lonesome Dove Drive
Shingle Springs, CA 95682, and

)
)
)
)
)
)
)
)
)
)
)
)
)

-----------)
COMPLAINT

Plaintiff Seeurities and Exehange Commission ("Commission") alleges as follows:

SUMMARY

1. This ease involves a type of investment scam known as a "prime bank" li'aud.

These fraudulent schemes involve the purported issuance, trading, or use of financial instruments

affiliated with international banking institutions or other obscure sources. Defendants who

conduct such schemes use technical-sounding terms and phrases to cloak what in fact are

fictitious investment programs with an air oflegitimacy. They prey on unsuspecting investors,

promise extraordinary returns for little risk, and expend considerable effort in distracting

investors who seek delinitive answers regarding how their investments are actually being used

and why the promised returns have not materialized.

2. From at least January 2013 until the present, Thomas G. Ellis and Yasuo Oda,

through their company, North Star Finance LLC ("North Star"), Thomas II. Vetter, and Michael

K. Martin and Sharon L. Salinas, through their companies, Capital Source Lending LLC and

Capital Source Funding LLC (collcctively, the "Capital Source entities" or "Capital Source"),

engaged in a fraudulent "prime bank" scheme. In furtherance of this scheme, Defendants lured

2

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 2 of 24 



and assisted in luring investors into complicated-sounding transaetions involving bank

guarantees and other financial instruments that supposedly could be "monetized" to generate

millions of dollars. Defendants claimed and assisted one another in claiming that these

extraordinary returns would then be available to investors in the form of project funding on

highly favorable terms. Since at least January 2013, North Star and Capital Source have

collected approximately $5 million- on information and bclicf, all from defrauded investors-

and several of the defendants have used investors' money to pay themselves hundreds of

thousands of dollars.

3. Defendants' investment programs were completely fictitious. Defendants neither

obtained nor "monetized" international bank instruments to secure funding as promised.

Although at least one investor who threatened to report the scheme received a partial refund of

his invested funds, the returns promised by North Star and Capital Source were never realized.

4. Defendants made numerous material misrepresentations to investors in

furtherance of the "prime bank" schcme. For example, Ellis, Vetter, and Martin repeatedly lied

to investors about the existence of the supposed bank instrument investments and the use of

investor funds. Ellis and Oda sent several emails in which they pressured investors to sign

phony documents, on the false pretenses that the investment program was both legitimate and

available for only a limited time. Martin falsely told one of these investors that he had

personally been involved in seven other transactions in 2014 in which he had "seeured" and

"monetized" bank guarantees. Salinas participated in and aided and abetted the scheme by

establishing bank accounts for Capital Source Funding, by falsely representing herself to be an

eserow officer, and by signing at least one document that fraudulently purported to be an escrow

agreement for the safekeeping of investor funds.

3

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 3 of 24 



5. No transactions in securities offered or sold by or for the Defendants have becn

registered with the Commission, or are eligible for an cxcmption from rcgistration with the

Commission. Nor were any of the Defendants registered as broker-dealers, as is required for

offering securities to investors in these circumstances, which several of the Defendants did.

6. By the conduct described herein, Defendants violated the anti-fraud and

registration provisions of the federal securities laws, and will continue to violate those provisions

unless restrained or enjoined by this Court.

JURISDICTION AND VENUE

7. The Commission brings this action, and this Court has jurisdiction over this

action, pursuant to authority conferred by Section 20(b) and 22(a) of the Securities Act [15

U.S.c. SS 77t(b) and 77v(a)] and Sections 21(d), 21(e) and 27 of the Exchange Act [15 U.S.c.

SS 78u(d), 78u(e) and 78aaj.

8. The Defendants, directly and indirectly, made use of the means and

instrumentalities of interstate commerce, and the means and instruments of transportation and

communication in interstate commerce, in connection with the transactions, acts, practices, and

courses of business alleged in this Complaint, certain of which occurred within the District of

Maryland.

9. Venue in this district is proper under Section 22(a) of the Securities Act [15

U.S.c. S 77v(a)] and Section 27 of the Exchange Act [15 U.S.c. S 78aa] because each Defendant

engaged in transactions, acts, practices, and courses of business constituting the violations

alleged in this Complaint, certain of which occurred within the District of Maryland, including

specific communications, within the District of Maryland, with investors in furtherance of the

fraudulent conduct alleged herein.

4

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 4 of 24 



IH:FENDANTS

10. North Star Finance LLC ("North Star") is a Maryland-based limited liability

company with its principal office at Ellis's home address in Silver Spring, Maryland. North Star

offers "project funding" in the building industry through bank guarantee transactions and other

programs. North Star is not registered with thc Commission in any capacity.

II. Thomas Ellis is a resident of Silver Spring, Maryland and a Senior Partner of

North Star. Ellis is not registercd with the Commission in any capacity.

12. Yasuo Oda is a rcsident of Ellicott City, Maryland and a Senior Partner of North

Star. He is also North Star's registered agent. Oda is not registered with the Commission in any

capacity.

13. Thomas H. Vetter is a residcnt of Danville, California. Vctter is not registered

with the Commission in any capacity.

14. Michael K. Martin is a resident of Virginia Beach, Virginia. He controls the

Capital Source entities, and he is the registered agent of Capital Source Lending LLC. Martin is

not registered with the Commission in any capacity.

IS. Sharon L. Salinas is a resident of Virginia Beach, Virginia. Through at least

March 20 IS, she served a number of roles with the Capital Source entities, including as "VI' of

Operations" in Capital Source Lending LLC's "Compliance Division," and she is the registered

agent of Capital Source Funding LLC. She is not registered with the Commission in any

capacity.

16. Capital Source Lending LLC is a limited liability company based in Virginia

Beach, Virginia, with its principal of1ice at Martin and Salinas's home address. Capital Source

Lending LLC promotes transactions involving bank instruments and "monetizing" services.

5

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 5 of 24 



17. Capital Source Funding LLC is a limited liability company based in Virginia

Beach, Virginia, with its principal office at Martin and Salinas's home address. In the scheme

described herein, Capital Source Funding LLC purported to act as an escrow company and

"paymaster" for Capital Source Lending LLC.

RELIEF DEFENDANTS

18. Goodwill Funding Inc. is an entity incorporated in Florida with its principal

place of business in Shingle Springs, California. Between September and December 2014,

Goodwill Funding, Inc. received at least $98,000 from Capital Source.

19. Charcl Winston is a resident of Shingle Springs, California and is described on

Goodwill Funding Ine.'s website as its founder and president. In November 2014, Winston

received at least $25,000 II'om Capital Source.

20. There is no evidence that the Relief Defendants provided any lawful services or

other value in return for these funds.

FACTS

I. Background

21. From at least January 2013 to the present, Defendants used the mail and wires to

defraud investors by offering or selling fictitious investments involving prime bank instruments,

including bank guarantees. Bank account records for North Star and Capital Source reflect that

the fraud was both widespread and substantial: Defendants appear to have received more than

$4.6 million in investor funds from over thirty investors. On information and belieC these

investors are all located in the United States, and several have limited investment experience.

22. Ellis and Oda, through North Star, and Martin and Salinas, through Capital

Source, promoted their fi'audulent scheme through their respective websites on the internet.

6

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 6 of 24 



Though the exact language varied from website to website and over time, the North Star and

Capital Source websites generally described vague and non-sensical processes, with complcx

terms, through which North Star and Capital Source would "escrow" investor money, and then

generate substantial funds that would be available to investors from the "monetization" of bank

guarantees through well-known banks.

23. In or about 2014, Ellis and Oda began promoting an investment program that

involved a North Star-Capital Source partnership, According to North Star's website, under this

program, the "North Star Flex 13GLoan Program," Capital Source would obtain and "monetize"

a bank guarantee (the "13G" in the product's title) upon North Star's receipt of an investor's

refundable application fee. The profits from this monetization process then would be made

available by Capital Source to North Star, which would loan investors extraordinary amounts of

money, in some instances up to $100 million, on highly favorable terms.

24. The investments offered by North Star and Capital Source are securities. As

described more fully below, Ellis, Oda, Vetter, Martin, and Salinas encouraged, or aided and

abetted each other in encouraging, investors to complete bogus legal doeuments and purported

escrow agreements, and then to wire investment funds to accounts that one or more of the

Defendants controlled. Investors were told that North Star and/or Capital Source would use

investor funds for costs incurred in "monetizing" bank instruments, and that this process would

pay fixed amounts on a specific future date,

25. Among other things, investors also were led to believe that their investments were

being pooled into groups, that they would realize profits from the "monetization" process in the

form of project funding on highly favorable terms, and that these profits were to come from the

efforts of North Star and/or Capital Source.

7

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 7 of 24 



26. Prime bank investment programs such as those offered by Defendants are

fictitious. Several government agencies, including the Commission. the U.S. Department of the

Treasury, and the Federal Bureau oflnvestigation (FBI), have posted investor alerts and

warnings about fictitious "prime bank" investments on their publicly available websites. These

agencies warn that the bank instruments similar to those described in this Complaint, including

bank guarantees, arc frequently used in fraudulent investment schemes. For example, the FBI

publicly warns investors that "[wJhile foreign banks usc instruments called 'bank guarantees' in

the same manner that U.S. banks usc letters of credit to insure paymcnt for goods in international

trade, such bank guarantees are never traded or sold on an)' kind o(market."

http://ww\v.lbi.gov/seams-safetv/fraud/fraud#pbnf (emphasis added).

27. Ellis, Oda, Vetter, Martin, and Salinas, and North Star and Capital Source knew

or were reckless in not knowing that their investment offerings were fictitious, that the

"monctization" proccss was bogus, that the investor funds collected by NOIth Star and/or Capital

Source were not being used in the manner represented to investors, and that each of their

statements described herein were materially false or misleading or omitted to state material facts

which would make the statements he made not materially misleading.

II. The Scheme to Defraud

Tlte Illitial Lllre: Ellis al/(I Vetter Pramise Milliolls of DOl/llrS ill Fillallcillg to Members of
tlte NatiOlllll Association of Homeblli/ders

28. The National Association of Homebuilders (NAI IE) is a trade association that

promotes the interests of homebuilders and the residential building industry. According its

website, the NAHB represents more than 140,000 members. In February 2014, the NAHB hcld

its annual meeting in Las Vegas, Nevada.

8

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 8 of 24 



29. Ellis, on behalf of North Star, attended the NAHI3's annual meeting as a guest

speaker and gave a presentation on a purported financing opportunity for homebuilders. Vetter,

who was a member of the NAHI3 Board of Directors and a participant on several NAHS

committees, accompanied and introduced Ellis to NAHI3 mcmbers at the meeting.

30. In his presentation, Ellis described a risk-free way for NAJ-I13members to secure

millions of dollars' worth of financing for rcal cst ate projects through North Star at highly

favorable rates. To take advantage of this program, homebuilders were instructed to wire a

refundablc "application fee" to North Star, which would be held safely in eserow.

31. A number ofNAHI3 members believed the North Star program to be legitimate

because Ellis's presentation was made at the NAHB meeting, with an introduction by Vetter. In

the two months following Ellis's presentation, several NAHI3 members applied for the program

by wiring hundreds of thousands of dollars' worth of application fees to North Star.

32. For example, Investor A.H. attended Ellis's presentation at the NAHI3 meeting.

On February 20, 2014, Investor A.ll. applied for $4.8 million in project funding by wiring a

$30,000 application fee to North Star.

33. Ellis told Investor A.ll. that his application fee would be held safely in an escrow

account. Ellis also supplied Investor A.H. with a "Lender Cover Sheet" that ostensibly detailed

the terms of the application. According to this document, Investor A.H.'s $30,000 payment

would be used to cover miscellaneous processing costs but was refundable "[s ]hould there be

non-performance by North Star Finance."

34. Contrary to Ellis's representations, North Star did not place Investor A.H.'s

$30,000 in an escrow account. In fact, in the week following North Star's receipt of Investor

9

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 9 of 24 



A.H.'s $30,000 application fee, North Star transferred $2,000 directly to Ellis, $10,000 directly

to Vetter, and $16,000 directly to ada.

35. Vetter made additional false representations to Investor A.H. regarding the

legitimacy of the North Star program. For example:

• Vetter told Investor A. 1-1.that the program was being funded by a group of seven
(7) U.S. billionaire investors. This was not true. In reality, the program that Ellis
described and Vetter promoted was fictitious.

• Vetter told Investor A.H. that he (Vetter) was not gaining financially from his role
in promoting the North Star program. This was not true. As alleged above, North
Star paid Vetter $10,000 within a week of its receipt of Investor A.H.'s
application fee. In total, North Star has paid Vetter at least approximately
$140,000 in transaction-based compensation.

36. In the months that followed, Ellis and VelteI' repeatedly assured Investor A.H. that

funding for his loan was expected imminently. When the funding did not materialize, Ellis and

Vetter provided vague excuses for the repeated delays.

Tlte Bait & Switclt: Defelldallts COllvillce NAIIB If/embers to Illvest ill tlte "Nortlt Star Flex
BG Loall Prog/'{/m," a Prime Balik F/,{/Ild

37. Having primed a number of investors for the imminent receipt of funding-

funding that never actually materialized Ellis, Vetter, ada, and Martin, assisted by Salinas,

then promoted the fraudulent prime bank investment program with Capital Source.

38. On or about July 24, 2014, Ellis sent Investor A.H. an email describing a new

funding program. In thc cmail, Ellis told Investor A.H. that, to obtain project funding, Investor

A.H. should scnd an additional $75,000 to an escrow account. Ellis's email explained that

$15,000 of this additional $75,000 payment would be used for various "processing" costs, and

the remainder would be held in escrow until "validation of the instrument." Once Investor A.H.

sentthc rcquired funds, Ellis's cmail stat cd that a "[blank instrument" would be "cut from a

"Top 25 Bank." Thc "bank instrumcnt" would thcn bc "monctized" and $4.8 million in funds

10

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 10 of 24
 

-




sent to "Capital Source Lending's account." These funds would then be available to Investor

A.H. on highly favorable terms. To further bait Investor A.B., Ellis falsely claimed that this new

arrangement ultimately would save Investor A.H. substantial costs and thus be more

economically advantageous.

39. Ellis allached a purported escrow agreement with Capital Source Funding for

Investor A.H. to complete in connection with the "bank instrument" program. The escrow

agreement contained instructions for Investor A.H. to wire $75,000 to a "Capital Source Funding

Escrow Account" at Wells Fargo Bank, as well as signature lines for both Investor A.B. and for

"Sharon Salinas (Federal Agent Ret)" on behalf of Capital Source Funding.

40. In the weeks that followed, through oral and email communications, Ellis, Veller,

Oda and Martin encouraged investors, including Investor A.B., to participate in the bank

instrument program. Individually and in combination with one another, Ellis, Veller, Oda and

Mm1in answered questions about the program, supplied bogus documents, including purported

'"escrow" and "participation" agreements, and pressured investors to part with their money.

41. For example, in telephone calls, Ellis and Veller told Investor A.H. that his

additional $75,000 would only be required for a very short time because Capital Source would

close the bank guarantee transaction within 2-3 weeks' time.

42. These statements were false. Ellis and Veller knew or were reckless in not

knowing that their representations materially misrepresented how Investor A.ll.' s money would

be used and omilled the material fact that none of the money would actually be used to close a

bank guarantee transaction, which itself was fictitious.

I I

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 11 of 24 



43. Ellis and Vetter also encouraged Investor A.H. to come up with the money in any

way possible, and suggested that Investor A.I-I. should borrow money from his family and repay

the amount as soon as the loan funds became available.

44. Similarly, Martin hosted a conference call with Investor A.II. and other investors

to explain the "bank instrument" program. In this call, Martin explained to a number of

investors, including Investor A.II., how he would secure and monetize the bank guarantee.

Martin also told the investors that he had successfully completed seven other transactions in

2014.

45. These statements were false. Martin knew or was reckless in not knowing that his

representations materially misrepresented how investor money would be used and omitted the

material fact that none of the investors' monies would actually be used to secure and monetize a

bank guarantee. Martin also knew or was reckless in not knowing that he had not successfully

completed seven other such transactions.

46. In an August 4, 2014 email, Ellis employed vague and complex terms to answer

Investor A.H.'s questions about a bogus "participation agreement." Ellis falsely told Investor

A.II., "we have 8 deals funding. So we have been working our butt off to get everyone funded."

47. In an August 6, 2014 email, ada sent InvestorA.II. what purported to be a

"revised" participation agreement. ada pressured Investor A.II. to apply for the investment

program, stating that "expiration" was on August I I, 2014.

48. In an August 1I, 2014 email, ada told InvestorA.II., "I still need to receive

signed escrow agreement. Attached again. Without it I can not send participation agreement for

process [sic]."

12

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 12 of 24 



49. Oda kncw or was recklcss in not knowing that his emails to Investor A.H.

materially misrcprescntcd thc legitimacy ofthc invcstmcnt program promotcd by North Star, and

omiltcd the matcrial facts that thc referenccd documcnts were bogus and that Investor A.II. 's

moncy actually would not bc sccurely held in an cscrow account.

50. On August 12,2014, Ellis emailcd Invcstor A.H. a ncw "cscrow agrccment" on

Capital Source Funding's Icltcrhcad. When Invcstor A.H. asked how this cscrow agreement

diffcrcd from an carlicr version, Ellis replied that "[floI' compliancc rcasons, thc cscrow has to be

on Capital Sourcc Funding Lcltcr I-Iead. Homeland Sccurity requircs this to be able to trace the

moncy. "

51. Ellis knew or was recklcss in not knowing that his answer to Invcstor A.H.

matcrially misrepresented thc Icgitimacy of the investmcnt program and omilted the material

facts that the document was bogus and that Investor A.I I.'s moncy actually would not bc held

securcly in an cscrow account.

52. Investor A.I-I. also spccifically inquired aboutthc rolc of Sharon Salinas, who was

listed as an "escrow officer" on the Capital Source cscrow agrccmcnt.

53. On or about August 13,2014, Vclter assurcd Invcstor A.H. that Salinas was

Mal1in's wife and an employee working for Martin. Vellcr furlhcr assurcd Investor A.H. that

Wells Fargo, not Salinas, would be acting as thc escrow agcnt holding Invcstor A.H.'s moncy.

54. On August 14,2014, Investor A.I-I. signed thc purportcd cscrow agrecment.

55. On August 15, 2014, Salinas countcrsigned thc purportcd cscrow agreemcnt as

the "CEO" of "Capital Sourcc Funding Escrow." According to this documcnt, twenty pcrcent of

Invcstor A.H.'s $75,000 "will be used right away for the cost of processing, undcrwriting, legal

fccs, issuance ofloan documcnts, commissions, wircs selting up account ofthc instrument," with

13

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 13 of 24 



the balance of Investor A.ll.'s $75,000 held safely in escrow. The purported escrow agreement

flllther provided that, oncc the "instrument has been validated as real and obtained, balance of

cscrow will be earned and will be called to wire to Capital Sourcc Lending."

56. On August 18,2014, Investor A.H. caused $75,000 to be wired to what he

believed to be Capital Source Funding's escrow account.

57. Bank records for Capital Source show that, in reality, Capital Source did not use

and maintain Investor A.H.'s money in the manner that Salinas represented in the escrow

agreement. On the same day it received Investor A.H.'s money, Capital Source caused $65,000

to be wired to an individual believed to be in Canada. There is no evidence that this individual

or anyone else actually used Investor A.H.'s money "for the cost of processing, underwriting,

legal fees, issuance of loan documents, commissions, [or] wires setting up account of the

instrument."

58. A number of other homebuilders and NAI IB members also invested in

Defendants' fraudulent bank guarantee program. Based on a review of bank records, it appears

that North Star and Capital Source together collected at least approximately $2.4 million from

such investors between February 2014 and April 2015.

59. There is no evidence that any investor money was used to acquire, "monetize:' or

otherwise use any purported bank instruments in any legitimate transaction.

60. Bank records, however, renect that North Star and Capital Source paid substantial

monies directly to several of the Defendants. For example, since February 2014, North Star has

paid Ellis, Oda, and Vetter approximately $528,000, $420,000, and $140,000, respectively.

14

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 14 of 24 



HalOillgFralldlllell/(l' Collec/ed SlIbs/all/iallm'es/ar Fllllds, Defelldallts Fabricated Excllses
al/{I Delays to Explaill the Failllre of Promised Flllldillg to Materialize

61. Upon receiving invcstors' money, Ellis and Martin deceived investors about the

status of their purported investments.

62. Ellis sent numcrous emails to Investor A.H. and other investors in the "bank

instrumcnt"' investment program in which he provided phony updates, blamcd delays on

fictitious bank processes, and admonished investors for asking detailed questions about the status

of their investments.

63. For example, on September 17, 2014, Ellis sent an email to a group of investors

that he referred to as "Group One," which, on information and belief, ineluded Investor A.H. and

four other investors. With the re: line "Update," Ellis stated [punctuation and syntax as per

original):

The banks are what we call "Bank to Bank" which means that one banker makes a
call to the other banker. Once that happens then monies are released. This is their
verification process that the buyer of the instrument has his money in the assigncd
account to purchase the BG [bank guarantee) from us.

The bank to bank call to happen can take one day up to 3 days. They arc not only
dealing with us but other clients.

There is nothing else we can do to push the process but wait. I asked cach and
everyone of you to wait until we receive word with can be any hour from now.
We will notify Bill our attorney and send an cmail out to each of you once we
reccive word.

64. In another "Update" email to investors, on October 7, 2014, Ellis stated

[punctuation and syntax as per original):

Guys,

The Bank Instrument has been sold which is great news. The buyer who
purchased the instrumcnt from us has asked for a minor / small change to the
procedure. Mike [Martin) is working on that tomorrow morning with the clearing
house and thcn the money /lows.

15

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 15 of 24 



Please: No phone calls as I have to keep all of my lines open for Mike in case he
needs something not to mention working on Group 2 with Bill our attorney. I will
send out another update tomorrow in the afternoon once we hear from the clearing
house.

65. On October 24,2014, Ellis and Martin jointly provided a telephonic update to

Investor A.l1. In this call, Martin stated that both he and Ellis had invested their own money in

the transaction. Martin and Ellis also offered further explanations for the delay, and they

confirmed that they were working together:

MARTIN: ... I've spent money, TomlEllis] has spent money. We have spent
more money than you have put into this thing. So you know, there's no option to
fail here. I've got over $1 million of my own money into this.

****
MARTIN: There are delays. We have those delays and a few things like that but
I've got four good buyers that have already been vetted and ready to go. I've got
one right now, they just sent me a return sheet for $5 billion. They're ready to
take this thing down. So you know, when Tom [Ellis] says it's time, that's the
way I get it. When my buyer says, listen, we're ready to go and send my email --
sends an email to my attorney going we arc RWA, ready, willing and able to take
this thing down and they send me RWA. If they don't complete this thing I can
turn them over to Interpol.

INVESTOR A.H.: Right.

ELLIS: And [Investor A.lI.], every email I send out, prior to me sending out that
email I read it back to Mike [Martin]. Am I correct, Mike?

MARTIN: Yes, you do.

66. Martin and Ellis knew or were reckless in not knowing that there was no bank

instrument or guarantee, and that their status updates and representations were materially false or

misleading or omitted to state material facts which would make the statements they made not

materially misleading.

16

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 16 of 24 



Defelldallts COlltillue to Deceive I111'estors

67. Since early 2015, Ellis and Oda, on behalfofNorth Star, have told several

investors that were awaiting results that North Star was going to secure and monetize its own

bank instruments, without the involvement of Capital Source Lending, and planned to continue

to do so in the future.

68. For example, in an email to an invcstor on April 27, 2015, Ellis stated that he had

just spoken to his "Rep I Monetizer" and that the "final forms were signed." Ellis falsely

represented that thc "ncxt step is the 'template' to do this I3G but also future I3G's:' and that this

"will also mcan the proccss in the future will be in place, run smooth, and cut down the funding

times .... North Star plans to be funding alot of projects this year and years to come."

69. Although at least one investor, Investor A.lI., has received a partial refund of his

investment following repeated demands, other investors continue to await the proceeds of their

investments or of refunds of the amounts that they invested with Defendants.

Defelldallts Have Beell Ellgagillg ill Fraudulellt "Prime Balik" Sc"emes
Sillce at Least 2013

70. Martin, through Capital Source, and aided and abetted by Salinas, has promoted

fraudulcnt bank instrumcnt transactions since at least 2013.

71. For example, in Junc 2013, Martin, through Capital Sourcc Lcnding, cntercd into

a "Fee Agrecment" with an investor whereby, for a $400,000 advancc fcc, Martin fraudulently

promised to secure a "leased SBLC" [Standy-By Lettcr of Creditl valued at €300 million. The

investor wired $400,000 to Martin.

72. The investor has not rcceivcd any return on his investment and thc $400,000

advancc fcc was ncver rcturned. Bank records show that approximately $218,000 or thc

17

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 17 of 24 



investor's funds were transferred to a third party, and that Martin and Salinas spent the remaining

funds on luxury car payments and miscellaneous living expenses.

73. In February 2014, law enforcement authorities in California arrested Martin's

investor, alleging that he had stolen the money that he had wired to Martin for investment

purposes. [n connection with that investigation, law enforcement authorities obtained freezes on

certain Wells Fargo bank accounts belonging to Capital Source Lending and Martin.

74. Approximately three weeks later, in February 2014, Salinas incorporated Capital

Source Funding LLC. Salinas then opened several bank accounts under its name, with her as the

only signer. By doing so, Salinas enabled Mat1in and Capital Source to operate outside the scope

of the asset freeze and otherwise enabled the fraudulent scheme to continue.

III. Alleg;ations Relating; To Relief Defendants

75. Between September and December 2014, Goodwill Funding Inc. and Charel

Winston received at least $123,000 from Capital Source, in the manner set forth below:

• Between September and December 2014, Salinas, on behalf of Capital Source,
signed checks payable to Goodwill Funding Inc. totaling approximately $98,000,
and

• In November 2014, Salinas, on behalf of Capital Source, signed a check payable
to Winston in the amount 01'$25,000.

76. On information and belief~ the funds received by the Relief Defendants came out

of a Capital Source account that collected funds from investors who sought to participate in

investment programs such as those described above.

77. There is no evidence that the Relief Defendants provided any lawful services or

other value in return for these funds.

18

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 18 of 24 



COUNT ONE

Violation of Exchange Act Section 1O(b) and Rule IOb-5
(North Star, Ellis, Oda, Martin, and the Capital Source entities)

78. The Commission realleges and incorporates herein by reference paragraphs I

through 777 above.

79. Defendants N0I1h Star, Ellis, Oda, Martin, and the Capital Source entities, directly

and indirectly, with scienter, by use of the means or instrumentalities of interstate commerce, or

of the mails, employed devices. schemes or artifices to defraud; made untrue statements of

materia! fact or omitted to state material facts necessary in order to make the statements made, in

light of the circumstances under which they were made, not misleading; and engaged in acts,

practices or courses of business which have been and are operating as a fraud or deceit upon the

purchasers or sellers of securities.

80. By reason of the foregoing, Defendants North Star, Ellis, Oda, Martin, and the

Capital Source entities have violated and, unless restrained and enjoined, will continue to violate

Exchange Act Section 10(b) [15 U.S.C. S 78j(b)] and Rule IOb-5 [17 C.F.R. S 240.IOb-5].

COUNT TWO

Aiding and Abetting Violations of Exchange Act Section IO(b) and Rule 10b-5
(North Star, Ellis, Oda, Vetter, Martin, and Salinas)

81. The Commission rca lieges and incorporates herein by reference paragraphs I

through 800 above.

82. Pursuant to Exchange Act Section 20(e) [15 U.S.C. S 78t(e)], Ellis, Oda, Vetter,

Martin, and Salinas knowingly or recklessly aided and abetted North Star and, unless restrained

and enjoined, will continue to aid and abet North Star by providing substantial assistance in

19

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 19 of 24 



furtherance ofNorlh Star's violations of Exchange Act Section 10(b) [15 U.S.C. 78j(b)] and

Rule 10b-5 [17 C.F.R. 240.1 Ob-5J.

83. Furlhermore, North Star, Ellis, Oda, Vetter, Mat1in, and Salinas knowingly or

recklessly aided and abetted the Capital Source entities and, unless restrained and enjoined, will

continue to aid and abet the Capital Source entities by providing substantial assistance in

furtherance of Capital Source's violations of Exchange Act Section IO(b) [I5 U.S.c. 78j(b)]

and Rule IOb-5 [17 C.F.R. 240.1 Ob-5].

COUNT THREE

Violation of Securities Act Section 17(a)
(North Star, Ellis, Oda, Martin, and the Capital Source entities)

84. The Commission rea lieges and incorporates herein by reference paragraphs I

through 83 above.

85. North Star, Ellis, Oda, Martin, and the Capital Sourcc entities, directly or

indirectly. in the offer or sale of securities, by the use of the means or instruments of

transporlation or communication in interstate commerce or by the use of the mails: (a) has

employed, is employing, or is about to employ devices, schcmes or artifices to defraud; (b) has

obtained, is obtaining or is aboulto obtain money or property by means of untrue statements of

material fact and omissions to state material facts necessary in order to make the statements

made, in light of the circumstances under which they were made, not misleading; and (c) has

engaged, is engaged, or is about to engage in transactions, acts, practices and courses of business

that operated or would operate as a fraud upon purchasers of securities.

86. By reason of the foregoing, North Star, Ellis, Oda, Martin, and the Capital Source

entities have violated and, unless restrained and enjoined, will continue to violate Securities Act

Section 17(a) [15 U.S.c. 77q(a)].

20

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 20 of 24 

~ 

~ 

~ 

~ 

~COUNT FOUR

Aiding and Abetting Violations of Securities Act Section 17(a)
(North Star, Ellis, ada, Vcttcr, Martin, and Salinas)

87. Thc Commission rcallcgcs and incorporates herein by refcrcnce paragraphs I

through 86 above.

88. Pursuant to Sccurities Act Section 15(b) [15 U.S.c. 77o(b)], Ellis, ada. Vetter,

Martin, and Salinas knowingly or recklessly aided and abetted, and, unless rcstrained and

enjoined, will continue to aid and abet North Star by providing substantial assistance in

furtherance of North Star's violations of Securities Act Section 17(a) r 15 U.S.c. 77q(a)].

89. Furthel1110re,North Star, Ellis, ada, Vetter, Martin, and Salinas knowingly or

recklessly aided and abettcd, and unless restrained and enjoined, will continue to aid and abet,

the Capital Sourcc entities by providing substantial assistance in furtherance of Capital Source's

violations of Securities Act Section 17(a) [15 U.S.c. 77q(a)].

COUNT FIVE

Violation of Securities Act Section 5
(North Star, Ellis, ada, Martin, Salinas, and the Capital Source entitics)

90. The Commission realleges and incorporates hcrein by rcfcrcnce paragraphs I

through 89 above.

91. Defendants N0I1h Star, Ellis, ada, Martin, Salinas and the Capital Sourcc entities,

directly or indirectly, made use of the means or instruments oftransportationor communication

in interstate commerce or of the mails to offer and sell securities through the use or medium of a

prospectus or otherwise, and carried or caused to be carried through the mails or in interstate

commerce, such securities for the purpose of sale or for delivery after sale, when no registration

21

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 21 of 24 

~ 

~ 

~
 



statement had been filed or was in effect as to such securities and no legally recognized

cxcmption from registration applied.

92. By reason of the foregoing, Dcfendants North Star, Ellis, ada, Martin, Salinas

and the Capital Source entities violated and, unless restrained and enjoined, will continue to

violate Securities Act Sections 5(a) and (c) [15 U.S.c. S 77e(a) and (c)].

COUNT SIX

Aiding and Abetting Violations of Securities Act Section 5(a) and 5(e)
(Ellis, Oda, Martin, and Salinas)

93. The Commission realleges and incorporates herein by reference paragraphs I

through 922 above.

94. Pursuant to Securities Act Section 15(b) [15 U.S.c. S 77o(b)], Ellis, ada, Martin,

and Salinas knowingly or recklessly aided and abetted the Capital Source entities' and/or North

Star's offer and sale of unregistered securities and, unless restrained and enjoined, will continue

to aid and abet the Capital Source entities and/or North Star by providing them with substantial

assistance in furtherance of their violations of Securities Act Sections 5(a) and (c) [15 U.S.c. S

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

COUNT SEVEN

Violatioll of Exchange Act Section 15(a)
(Ellis, ada, Vetter, and Martin)

95. The Commission rea lieges and incorporates herein by reference paragraphs 1

through 94 above.

96. Ellis, ada, Vetter, and Martin, while acting as brokers or dealers, made use of the

mails or any means or instrumentality of interstate commerce to effeet transactions in, or to

22

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 22 of 24 



induce or attempt to induce the purchase or sale of, securities without being registered with the

Commission as a broker or dealer or an associated person of a registered broker-dealer.

97. By reason of the foregoing, Ellis, Oda, Vetter, and Martin violated and, unless

restrained and enjoined, will continue to violate Exchange Act Section 15(a) [15 U.S.c. 9

780(a»).

CLAIM AGAINST RELIEF DF:FF:NDANTS

98. The Commission realleges and incorporates herein by reference paragraphs I

through 97 above.

99. Goodwill Funding Inc. and Winston received, directly or indirectly, filllds and/or

other benefits from one or more of the Defendants which are the proceeds of unlawful activities

alleged in this Complaint and to which these Relief Defendants have no legitimate claim.

I'RA YER FOR RELIEF

WHEREFORE, the Commission respectfully requests that the Court:

I.

Enter judgment in favor of the Commission finding that the Defendants violated the

federal securities laws and Commission rules alleged against them in this Complaint;

II.

Permanently enjoin the Defendants from further violations of the federal securities laws

and Commission rules alleged in this Complaint;

III.

Permanently enjoin the Defendants from directly or indirectly participating in the

issuance, offer, or sale of any security. including but not limited to bank guarantees, irrevocable

bank undertaking letters, joint venture agreements, proofs of funds, medium term notes, standby

23

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 23 of 24 



•

leiters of credit, and similar instruments, with the exception of the purchase or sale of securities

listed on a national securities exchange;

IV.

Order all Defendants and Relief Defendants to disgorge, as the Court may direct, all ill-

gotten gains received or benefits in any form derived from the illegal conduct alleged in this

Complaint, together with pre-judgment interest thereon;

V.
Order all Defendants to pay civil monetary penalties pursuant to Securities Act Section

20(d) [15 U.S.C. S 77t(d)] and Exchange Act Section 21(d)(3) [15 U.S.c. S 78u(d)(3)]; and

VI.

Grant such other equitable and legal relief as may be appropriate or necessary for the

benefit of investors pursuant to Exchange Act Section 21(d)(5) [I5 U.S.C. S 78u(d)(5)].

,JURY DEMAND

The Commission demands a trial by jury on all issues so triable.

Date: May 8, 2015

24

By:

M t~~J)Jb
Matthew 1'. Cohen
Stephen W. Simpson
Timothy N. England

Counsel for Plaintiff
U.S. Securities and Exchange Commission
100 F Street, N .E.
Washington, DC 20549
Fax: 202.772.9228
eohenma0Jsee.gov / Tel. 202.551.7276
simpsons0Jsec.gov / Tel. 202.551.4513
englandt0Jsee.gov / Tel. 202.551.4959

   Case 8:15-cv-01339-GJH Document 1 Filed 05/11/15 Page 24 of 24