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Securities and Exchange Commission v. FTC Capital Markets

June 30, 2010

SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF,
v.
FTC CAPITAL MARKETS, INC., FTC EMERGING MARKETS, INC., ALSO D/B/A FTC GROUP,GUILLERMO DAVID CLAMENS, AND LINA LOPEZ A/K/A NAZLY CUCUNUBA LOPEZ, DEFENDANTS.



The opinion of the court was delivered by: Paul G. Gardephe, U.S.D.J.

MEMORANDUM OPINION & ORDER

The Securities and Exchange Commission brings this action against Defendants FTC Capital Markets, Inc. ("FTC"), FTC Emerging Markets, Inc., Guillermo David Clamens and Lina Lopez for violations of the anti-fraud provisions of the federal securities laws. Lopez moves to modify the June 29, 2009 preliminary injunction to permit FTC to advance her legal fees in the parallel criminal action brought against her. For the reasons stated below, Lopez's motion is GRANTED.

BACKGROUND

FTC Capital Markets is a broker-dealer "transacting in debt and equity securities on behalf of mostly South American institutional customers." (Cmplt. ¶ 11) FTC Emerging Markets is a Panamanian affiliate of FTC Capital Markets. (Cmplt. ¶ 12) Clamens is the chairman and former chief executive officer of FTC Capital Markets and the president of FTC Emerging Markets. (Cmplt. ¶¶ 11-12) Lopez is an employee of FTC. (Cmplt. ¶ 14) Citgo Petroleum Corporation and PDV Holding held brokerage accounts with FTC Capital Markets. (Cmplt. ¶ 19)

The Complaint alleges that "from April through November 2008, defendants Clamens and Lopez caused FTC to make numerous unauthorized transactions in Citgo's and PDV's FTC Accounts." (Cmplt. ¶ 23) Lopez is also alleged to have sent false account statements to Citgo and PDV. (Cmplt. ¶ 25) Beginning in August 2008, Clamens and Lopez "attempted to hide their fraudulent conduct by engaging in additional unauthorized transactions." (Cmplt. ¶¶ 27-33)

The Complaint also charges that FTC Emerging Markets sent false account statements to a Venezuelan bank indicating that it held credit linked notes that had, in reality, already been retired. (Cmplt. ¶¶ 34-36) Clamens and Lopez allegedly perpetrated a sort of Ponzi scheme, engaging in unauthorized trading in the accounts belonging to Citgo and PDV in order to "conceal their fraud upon the Venezuelan bank concerning the bank's purported purchase of the credit linked notes." (Cmplt. ¶¶ 38-39)

As a result of the alleged fraud, approximately $22 million belonging to Citgo and PDV was not returned to their accounts. (Cmplt. ¶ 32)

The Complaint further alleges that FTC Emerging Markets acted as a broker-dealer from at least January 2008 until the initiation of this action, despite not being registered as a broker-dealer with the Commission. (Cmplt. ¶¶ 40-43)

This action was filed on May 20, 2009. The Commission claims that (1) Defendants violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 (Cmplt. ¶¶ 44-47); (2) FTC Capital Markets, Inc. violated Section 15(c) of the Exchange Act (Cmplt. ¶¶ 48-51); (3) FTC Emerging Markets violated Section 15(a) of the Exchange Act (Cmplt. ¶¶ 52-54); (4) Clamens and Lopez aided and abetted FTC Capital Markets' violations of Section 15(c) of the Exchange Act (Cmplt. ¶¶ 55-57); and (5) Clamens and Lopez aided and abetted FTC Emerging Markets' violations of Section 15(a) of the Exchange Act (Cmplt. ¶¶ 58-60).

On June 17, 2009, Judge Colleen McMahon, sitting in Part I, entered a temporary restraining order freezing the assets of Defendants Clamens, FTC Capital Markets, and FTC Emerging Markets. (Dkt. No. 4) The TRO froze sixty-five accounts, including accounts held by Clamens, FTC Capital Markets, FTC Emerging Markets, FTC Holdings, FTC Group Caracas, FTC Group Sociedad de Corretaje de Titutlos Valores, FTC London UK, and FTC International. (Id., Ex. A) The TRO also froze accounts in the name of Forum Trading Corporation and Prime and Global Securities and restrained Clamens' interest in a New York City apartment. (Id.)

On June 29, 2009, this Court entered a stipulation and order converting the TRO to a preliminary injunction and directing that, pending final disposition of this action, Defendants, and their agents, servants, employees, and attorneys, and those persons in active concert or participation with them who receive actual notice of such Order by personal service or otherwise, and each of them, hold and retain within their control, and otherwise prevent, any withdrawal, transfer, pledge, encumbrance, assignment, dissipation, concealment or other disposal of any assets, funds, or other property (including money, real or personal property, securities, commodities, choses in action, business interests or other property of any kind whatsoever) of, held by, or under the control of Defendants.... (Dkt. No. 12)

I. THE CRIMINAL CASE AGAINST LOPEZ

On May 18, 2009, the Government unsealed a criminal complaint against Lopez and Clamens and arrested Lopez in Miami, where she resides. (Chaudhry Decl. ¶ 3, Ex. 1) Clamens was not apprehended and has not appeared to answer the charges against him.

Two days after Lopez's arrest, her attorney, Priya Chaudhry, spoke to William Brodsky, an attorney representing FTC Capital Markets. (Chaudhry Decl. ¶ 5) Brodsky "stated that the company will pay and advance Ms. Lopez'[s] legal fees." (Id.) That same day, Chaudhry sent a letter to Jorge Piedrahita, the CEO of FTC Capital Markets, to memorialize their agreement that FTC Capital Markets would indeed pay Lopez's legal fees in the criminal action. (Chaudhry Decl. ¶ 5, Ex. 3) This letter -- signed by Piedrahita -- "set forth the understanding between [Chaudhry and Piedrahita] of the legal services to be performed, the basis on which [Chaudhry] will be paid for those services, and the terms and conditions of [Chaudhry's] representation." (Id. at 1) The letter further provided that FTC Capital Markets would pay Lopez a retainer of $25,000 and would continue to pay ongoing legal fees in Lopez's case. (Id. at 2) FTC Capital Markets paid Chaudhry $25,000 on May 21, 2009. (Chaudhry Decl. ¶ 6)

On May 27, 2009, Chaudhry met with Brodsky and Piedrahita, among others, to discuss her ongoing representation of Lopez in the criminal action. (Chaudhry Decl. ¶ 7) At that time, FTC Capital Markets agreed to advance further legal fees to Chaudhry. (Id.) Following that meeting, Brodsky informed Chaudhry that FTC Capital Markets would advance her an additional $100,000 to pay Lopez's legal fees. (Id.) However, on June 17, 2009 -- before FTC Capital Markets made this payment -- its assets were frozen by Judge McMahon's TRO. (Chaudhry Decl. ¶¶ 7-8)

On October 16, 2009, the Government filed an Information in United States v. Lopez (09 Cr. 985) (RPP) charging Lopez with one count of conspiracy to commit securities fraud and wire fraud and one count of securities fraud. Lopez pled guilty to both counts pursuant to a cooperation agreement with the Government. (Chaudhry Decl. ¶ 18, Ex. 10) A control date for Lopez's sentencing has been set for November 16, 2010. United States v. Lopez (09 Cr. 985), Oct. 16, 2009 Minute Entry for proceedings before Judge Robert P. Patterson.

Chaudhry represents that as of November 12, 2009, she has incurred $101,745 in fees in connection with her representation of Lopez in the criminal action. (Chaudhry Decl. ¶ 19)

DISCUSSION

"It is well settled that a district court has authority in a securities fraud case to grant ancillary relief in the form of orders appointing a receiver or temporarily freezing assets." SEC v. Coates, No. 94 Civ. 5361, 1994 WL 455558, at *1 (S.D.N.Y. Aug. 23, 1994) (citing SEC v. Manor Nursing Centers, Inc., 458 F.2d 1082, 1103, 1105 (2d Cir. 1972); SEC v. Unifund SAL, 910 F.2d 1028, 1041 (2d Cir. 1990)). "The purpose of such relief is to facilitate enforcement of any disgorgement remedy that might be ordered in the event a violation is established at trial." Coates, No. 94 Civ. 5361, 1994 WL 455558, at *1. When a court weighs the imposition or terms of an asset freeze, "the ...


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