15 June – LAWFUEL – The Law News Network – Late yesterday the SEC filed an enforcement action in Connecticut Federal Court against two phony New York City-based venture capital firms, Blue Square Management, Inc. and Westwood Holdings, Inc., and their principals, Viktor Novosselov of Manhattan (a/k/a David Markowitz) and Igor Malyar of Staten Island (a/k/a George Falcone and Michael Safir). In consecutive fraudulent offerings, Blue Square and Westwood cold-callers sold “pre-IPO” stock in two sham ATM companies, raising a total of $4.9 million from over 360 investors nationwide. Blue Square and Westwood subsequently disconnected their phone lines and vacated their offices leaving investors with no trace of their whereabouts. (Though Blue Square actually kept paying a receptionist to answer the phones, even after they had closed its office). Novosselov and Malyar dissipated virtually all of investors’ funds, taking the vast majority of cash directly via ATM withdrawals and using company credit cards to pay for a trip to Las Vegas, a trip to Miami, dining out at expensive restaurants, health club memberships at the New York Sports Club and a litany of other expenditures. To add credibility to their scheme, the defendants created websites to make themselves appear legitimate, ongoing and successful.
The SEC’s action seeks permanent injunctions, disgorgement and civil penalties against Blue Square, Westwood, Novosselov and Malyar for violating, in part, the antifraud provisions of the federal securities laws. In a related criminal action, the Connecticut U.S. Attorney’s Office also announced today the arrest of Novosselov and Malyar and the unsealing of an indictment charging them with securities fraud, mail fraud, money laundering, and money laundering conspiracy violations based on their activities at Blue Square.
The FBI captured Novosselov, who had been placed on a border watch, at John F. Kennedy International Airport, when he tried to enter the United States on a trip from Russia via an Aeroflot flight. The New York Police captured Malyar two weeks later on a federal arrest warrant in Staten Island. If convicted on all of the 28 counts of the U.S. Attorney’s indictment, Novosselov and Malyar each face a maximum term of imprisonment of 245 years and a fine of up to $3,410,000. These prosecutions are the product of the combined efforts of the U.S. Attorneys Office of the District of Connecticut; the Federal Bureau of Investigation; the Social Security Administration Office of the Inspector General; the U.S.. Postal Inspection Service; the New York Police Department and the U.S. Immigration and Customs Enforcement Service.
The United States Securities and Exchange Commission announced today that it has filed a civil action in the United States District Court for the District of Connecticut against Blue Square Management, Inc., Viktor Novosselov (a/k/a David Markowitz), Westwood Holdings, Inc. and Igor Malyar (a/k/a George Falcone and Michael Safir) in connection with the unregistered and fraudulent offerings of “pre-IPO” stock in two separate automatic teller machine (“ATM”) companies in which the defendants raised at least $4.9 million from over 360 investors nationwide.
The Commission’s complaint alleges that the two fraudulent offerings were conducted in succession between 2001 and late 2004 by two unlicensed New York City-based venture capital firms and at least two unlicensed brokers who concealed their true identities from investors. Novosselov, with the substantial assistance of Malyar, orchestrated a fraudulent offering through Blue Square Management, Inc., a purported venture capital firm. From January 2001 to February 2004, one or more representatives of Blue Square cold-called potential investors across the country and solicited their investments in the stock and warrants of Cash Money Lending Corp., a purported ATM management company. After raising approximately $3.7 million from over 280 investors, Blue Square disconnected its phone lines and vacated its offices leaving investors unable to contact anyone about their investments.
The Commission’s complaint further alleges that about the same time Blue Square disappeared, Malyar and several other individuals claiming to be associated with Westwood Holdings, Inc. began soliciting investors in a similar fraudulent offering involving a second purported ATM-related company. Using many of the same methods of operation, Westwood’s representatives were able to raise at least $1.2 million from over 80 investors.
According to the Commission’s complaint, the defendants induced investment through false and misleading statements which included verbal and written claims that investments would yield up to 160% returns from a highly anticipated IPO and/or buy-out proposal. In fact, none of the promised IPOs or buy-out proposals ever materialized. Instead, the defendants dissipated virtually all of investors’ funds, using the proceeds primarily for cash, food, entertainment and other personal expenses.
The Commission’s action seeks permanent injunctions, orders of disgorgement and civil penalties against Blue Square, Novosselov, Westwood and Malyar for violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b), 15(a) and 15(c) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and also against Malyar for aiding and abetting Novosselov and Blue Square’s violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
In a related criminal action, the United States Attorney’s Office for the District of Connecticut announced today the arrest of Novosselov and Malyar and the unsealing of an indictment charging them with securities fraud, mail fraud, money laundering, and money laundering conspiracy violations based on their activities at Blue Square.
The staff acknowledges the assistance and cooperation of the United States Attorney’s Office for the District of Connecticut, the Federal Bureau of Investigation, the Social Security Administration (Office of the Inspector General, Office of Investigations), the United States Postal Inspection Service, the New York Police Department and the United States Immigration and Customs Enforcement Service in the investigation of this matter.
For tips on how to avoid investment scams involving cold calling, visit http://www.sec.gov/investor/pubs/coldcall.htm. To report suspicious activity to the Commission, visit http://www.sec.gov/complaint.shtml or e-mail email@example.com.