SEC Sues Newport Man, Alleges Fraud

The federal government has filed a securities fraud lawsuit against a Newport Beach businessman and won an immediate court order freezing his assets and those of his two companies.

The Securities and Exchange Commission charges in its civil action that Henry J. Kyle sold more than $3 million in securities that were unregistered and promoted as safe investments to mostly elderly citizens throughout the country and that he diverted some of the money to companies run by associates.

Using hard-sell, boiler-room tactics over the past three years, the SEC action alleges, Kyle and his companies, HJK & Associates Inc. and Galatin Financial Corp., raised the money to engage in foreign currency trading, to buy and sell car loans and to buy and lease jukeboxes.

The freeze order also affects Galatin’s parent company, Pioneer Music Systems Inc., which is named as a relief defendant because it holds money obtained from Galatin and may be required to return that money.

More than $144,000 of the money he brought in was diverted to other companies, said Sylvia Scott, the SEC’s assistant regional administrator. Those companies and the Kyle associates are also named as relief defendants in the lawsuit, filed in federal court on Monday, and will be called on to return that money, she said.

Those defendants are R. Michael Farmer and his Financial Technology Resources company in San Juan Capistrano, First Lenders Indemnity Corp. in Irvine and Assured Financial Group of America Inc., also in San Juan Capistrano.

U.S. District Judge Richard A. Gadbois, who issued the freeze order Monday, will decide Tuesday whether to extend that order and whether to issue an injunction against further securities violations.