Regulators Win Injunction Against KS Resources

Federal regulators won a court order that prohibits an oil and gas firm and its operators--accused of operating a Ponzi scheme--from violating securities laws and selling investments.

The preliminary injunction against KS Resources and others continues a temporary order freezing the assets of the company, its affiliates and their owners until the case is resolved.

KS Resources raised $34.9 million, most from elderly Southern Californians, many in retirement communities like Leisure World in Laguna Hills. It was an offshoot of Mustang Development Co., which operated out of the same Beverly Hills office building and collected $150 million from small investors.

The Securities and Exchange Commission charges in its lawsuit against KS Resources, its brokerage arm, Lazar, Frederick & Co., and executives at both companies that a substantial portion of the interest earned by investors simply came from other investors’ money.

The SEC also alleges that the companies and operators John K. Judd Jr., Mark D. Seigel and Alexander L. Kahan have misappropriated more than $6 million in investor money.

“We don’t expect a trial until the first part of next year,” said James Howell, a lawyer with the SEC.

Douglas K. Simpson, a lawyer representing some of the defendants in the case, said he was considering appealing the preliminary injunction and a recent appointment of a receiver.

“We do not believe the evidence presented by the SEC supports the relief ordered by the court,” he said. “Their allegations are overreaching.”