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SEC Busts L.A. Boiler Room Operation

LOS ANGELES (CN) - The SEC charged three firms and four people with running a boiler-room scheme that defrauded investors of $3 million, hundreds of thousands of dollars of which one of the men spent on himself and his girlfriend.

The SEC claims that Spyglass Equity Systems cold-called suckers and induced them to invest in co-defendants Flatiron Capital Partners and Flatiron Systems, which supposedly had "stock trading systems ... based on algorithms or computer models."

It was all nonsense, the SEC says. It claims Flatiron's boss, defendant David E. Howard II, 31, of New York City, "misappropriated nearly $500,000 in investor funds, over $300,000 of which he used for personal expenses, including travel, personal and adult entertainment, and gifts for his girlfriend."

The agency also sued Richard L. Carter, 42, of Torrance, a "co-owner and co-operator of Spyglass," who also owns and operates The Trade Tech Institute, which the SEC calls "a telemarketing firm or boiler room similar to Spyglass."

It sued Preston Sjoblom, 40, of Great Falls, Va., a co-owner of Spyglass who also worked for Trade Tech.

And it sued Tyson D. Elliott, 30, of Hermosa Beach, who co-owned Spyglass until he sold off his share, and co-owned and was "primary controller" of Trade Tech. He owns and operates another telemarketing firm "selling commodities and futures trading systems," the SEC says.

"During the scheme, Spyglass earned 'licensing fees' (i.e., commissions) of approximately $1,130,000. Spyglass then made payments from the investor money of approximately $139,260 to Carter, $170,988 to Elliott, and $208,916 to Sjoblom. Howard also received payments of at least $20,400 from Spyglass," according to the complaint.

The SEC seeks disgorgement, penalties and injunctions.


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