Two Los Angeles firms and individuals accused of raising at least $230 million through the fraudulent sale of promissory notes will pay a fine to settle the charges, regulators said Tuesday.
J.T. Wallenbrock & Associates, Larry Toshio Osaki, Van Y. Ichinotsubo and Citadel Capital Management Group Inc. agreed last week to a permanent injunction barring them from acting as unregistered brokers or selling unregistered securities. The Securities and Exchange Commission said the defendants did not admit or deny liability.
The SEC last year sued Wallenbrock and the others, claiming they raised money from about 1,000 investors by selling unregistered promissory notes touting a 20% return every three months.
At least $100 million was used to pay back other investors and create an illusion that there was a legitimate business, regulators said.
U.S. District Judge Edward Rafeedie in Los Angeles will determine how much the defendants should pay back and may impose other penalties, the SEC said. The agreement also averts a trial and prevents the defendants from arguing at court that they didn't violate federal securities laws.
"After more than one year of very expensive litigation, the SEC presented a settlement proposal that made sense for my clients at this time," said Huey Cotton, who represents Wollenbrock and the other defendants.
The defendants had told investors that Wallenbrock would use the proceeds of the notes to purchase receivables of Malaysian latex glove manufacturers for 70% to 80% of the balance due on the receivables, the SEC said.
A promissory note is a written pledge to pay or repay a specified sum of money at a stated time with interest added.