Ponzi Collaborators to Turn Over $766,000

DALLAS (CN) - Two men must disgorge more than $766,000 in ill-gotten gains from Ponzi scheme launched by David Allen, co-founder of China Voice Holding, a federal judge ruled.

U.S. District Judge Reed O'Connor granted the U.S. Securities & Exchange Commission's motion for final judgment of disgorgement, prejudgment interest and third-tier penalties against Alex Dowlatshahi and Christopher Mills on Wednesday. The SEC sued Allen, Alex Dowlatshahi and Christopher Mills, among several other individuals and business entities, in April 2011.

It said the defendants used the business entities to solicit investments in at least 16 opportunities offered by limited partnerships that Allen controlled.

"Instead of using those investments as promised to investors, defendants used the investment proceeds to pay back investors from prior limited partnerships and to make payments to Allen, Dowlatshahi, Mills, and their affiliated companies," the 14-page order states.

In August 2011, Dowlatshahi consented to the entry of a judgment permanently restraining and enjoining him and his entities from violating specific provisions of federal securities laws. Mills entered into a similar agreement one month later.

O'Connor concluded the SEC's proposed disgorgement was a reasonable approximation of the defendants' gain.

"Court finds Dowlatshahi jointly and severally liable for disgorgement of ill-gotten gains with his entities: (1) Lucrative [Enterprises Corp.] to disgorge ill-gotten gains of $300,454, (2) [Strategic Capital] Synergetic [Solutions LLC] to disgorge ill-gotten gains of $24,091, and (3) relief defendants Darius Assets to disgorge ill-gotten gains of $305,989," O'Connor wrote. "The court finds Mills should disgorge ill-gotten gains of $2,165 and finds Mills jointly and severally liable for disgorgement of ill-gotten gains with his entities: (1) Sleeping Bear [LLC] to disgorge ill-gotten gains of $116,219 and (2) Silver Summit [Holdings LLC] to disgorge ill-gotten gains of $18,025."

Dowlatshani failed to show the judge that he would be unable to pay the disgorgement amount, and O'Connor was also unsympathetic to Mills, who claimed that he has accepted responsibility for his actions and has already suffered financial consequences.

The third-tier penalties will also not face a reduction with O'Connor disagreeing that the defendants cooperated with the SEC to recover assets and litigate the case.

"Such cooperation does not change the fact that defendants participated in a fraudulent scheme and misled investors, resulting in the substantial loss or risk of substantial loss of investor funds," he wrote. "Further, plaintiff has already reduced the requested penalty amounts based upon the Dowlatshahi defendants' cooperation."

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