 UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
LITIGATION RELEASE NO. 17057 , June 29, 2001
SECURITIES
AND EXCHANGE COMMISSION V. GARRY W. STROUD, INDIVIDUALLY
AND D/B/A DIAMOND GLOBAL HOLDING TRUST, EURO CREDIT
AND EXCHANGE BANK LTD., AND ANGELIC INTERNATIONAL
; Case No. CIV-01-999 L, USDC, WESTERN DISTRICT
OF OKLAHOMA, OKLAHOMA CITY DIVISION
The
United States Securities and Exchange Commission
("Commission") announced that on June
28, 2001, United States District Court Judge Lee
R. West, issued emergency orders, including a
temporary restraining order and asset freeze,
against Garry W. Stroud, an alleged Internet investment
swindler operating from British Columbia, Canada,
and Lynden, Washington. The Commission's complaint
charged Stroud with conducting an ongoing Internet
investment scheme that fleeced over 2,200 investors
worldwide of approximately $1 million since 1998.
According to the Commission's complaint, Stroud,
operating under several fictitious businesses,
used Internet websites and e-mail to hawk seven
spurious investments, including so-called "Morgenthau
Gold Bond Certificates," foreign gold-mining
projects, and "prime-bank" trading programs,
promising investors extraordinary returns with
little or no risk. The complaint further alleged
that these investments were, in every case, pure
shams and that Stroud had not paid a single investor
the promised returns. Stroud was assisted in the
scheme, according to the complaint, by Adele Louros,
whom it named as a relief defendant. Moreover,
according to the complaint, Stroud targeted his
fraudulent investment offerings mainly to investors
who were recently defrauded in another investment
scheme. That scheme, known as E-Biz Ventures,
was the subject of a Commission enforcement action
in January 2001 involving over 20,000 investors
and over $9 million. SEC v. E-Biz Ventures, et.
al, Lit. Rel. 16886, February 1, 2001.
Garry
W. Stroud, age 55, is a Canadian citizen residing
in Aldergrove, British Columbia, Canada. Stroud
operated several fictitious entities, including
"Diamond Global Holding Trust," "Euro
Credit and Exchange Bank Ltd.," and "Angelic
International."
Adele
Louros, age unknown, is a Canadian citizen
residing in Montreal, Ontario, Canada. Louros
is the named holder of several Internet payment
accounts into which at least $300,000 of investor
funds solicited by Stroud has been deposited.
Louros is named in the lawsuit as a "relief
defendant" solely for the purposes of equitable
relief.
The
Commission's complaint alleged that Stroud offered
the following bogus investments:
The
Angelic International Offering
Using
the name Angelic International, Stroud offered
an "international high yield trading"
program in which investor money would purportedly
double every 22-days. Individual victims invested
as little as $100 or as much as $10,000. Although
Angelic International had purportedly completed
four or five 22-day investment "cycles,"
the program was a complete fabrication and never
produced any returns to its investors.
The
Morgenthau Gold Bond Offering
Stroud,
operating as Euro Credit, offered a new "high
yield investment program" involving trillion-dollar,
"Morgenthau Gold Bond Certificates",
purportedly issued by the United States government
in 1934. Stroud called himself a "merchant/commercial"
banker with access to numerous of the so-called
Morgenthau bonds, which he claimed could be sold
back to the government at a steep profit. Stroud
claimed that investors who participated in the
Morgenthau program could "net a return of
as much as 5:1 on [their] invested capital over
60 to 90 days" and that the investment was
backed by certificates of deposit by his Euro
Credit bank. In fact, the Morgenthau gold bonds
did not exist.
The
"China Project"
Operating
as Diamond Global, Stroud solicited investors
in a supposed ongoing Chinese mining operation
that extracted gold "tailings" from
previously abandoned Chinese gold mines. Stroud
claimed that China had given Diamond Global the
rights to the operation because China lacked the
required technology to extract the gold from the
tailings. Stroud "guaranteed" estimated
returns exceeding $1 billion on the project and
claimed that the "Bank of China" had
extended financing to Diamond Global. Each of
these claims was false and the mining operation
did not exist.
The
"Mexicali Project"
As
Diamond Global, Stroud claimed to own the rights
to develop several gold mines in Mexico and that
one of the mines had "proven" gold reserves
of between $10 billion and $15 billion. Stroud
was purportedly to use investor money to pay the
combined cost of the mining operations and to
share the profits with investors. In reality,
there were no such mining operations.
The
Diamond Global "Prime-Bank" Offerings
In
addition to the prime-bank investment offered
under Angelic International, Stroud offered three
others under Diamond Global. Stroud called these
offerings the Evergreen II, Destiny, and Omega
projects, promising investors incredible returns
through mysterious, foreign "trading"
or "delayed roll-over" programs. In
reality, these programs did not exist.
Stroud's
various investment schemes came to the Commission's
attention after he tendered a $9 million check
to the United States District Court in the E-Biz
litigation, purportedly to reimburse the E-biz
investors. He wrote the check on an account at
Euro Credit bank, which, as noted above, does
not exist. Hence, the check bounced. In explaining
away the bad check to E-Biz investors, Stroud
claimed that he had simply withdrawn it because
the Court and the Commission intended to steal
some of the money. According to the Complaint,
the Commission's follow-up investigation confirmed
that Euro Credit was not a bank and that the check
was bogus. The Commission alleged in its complaint
that Stroud's motive for tendering the $9 million
check to the court in the E-Biz litigation was
to obtain access to the E-Biz investors to pitch
them on his own investments. In fact, a number
of the victims in Stroud's investment schemes
were also E-Biz investors.
In
its lawsuit, the Commission has sought emergency
orders: (1) temporarily restraining and enjoining
Stroud from continuing to violate the federal
securities laws; (2) freezing all of his assets
and the assets of Louros derived from the scheme;
(3) requiring Stroud and Louros to furnish accountings,
(5) repatriating proceeds moved abroad; (6) prohibiting
the destruction of documents; and (7) authorizing
expedited discovery.
The
Commission alleged that Stroud violated the following
provisions of the federal securities laws: (1)
the antifraud provisions, at Section 17(a) of
the Securities Act of 1933 ("Securities Act"),
Section 10(b) of the Securities Exchange Act of
1934, and Rule 10b-5 thereunder; (2) and the registration
provisions, at Sections 5(a) and 5(c) of the Securities
Act. In addition to the emergency relief described
above, the Commission is seeking preliminary and
permanent injunctions restraining future violations
of the foregoing provisions of the federal securities
laws, an order requiring the defendant to disgorge
all wrongfully obtained profits plus prejudgment
interest, and civil penalties. The Commission
is also seeking the disgorgement of fraudulent
proceeds from the relief defendant.
For
tips on how to avoid Internet "pump-and-dump"
stock manipulation schemes, visit http://www.sec.gov/investor/online/pump.htm.
For more information about Internet fraud, visit
http://www.sec.gov/divisions/enforce/internetenforce.htm.
To report suspicious activity involving possible
Internet fraud, visit
http://www.sec.gov/complaint.shtml.
from: http://www.sec.gov/litigation/litreleases/lr17057.htm
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