SEC v. Amit V. Patel, No. 0:10-cv-04937, District of Minnesota (Dec. 22, 2010) — Complaint

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MINNESOTA
_______________________________________
     :
SECURITIES AND EXCHANGE  :
COMMISSION,     :
       :
 Plaintiff,     :
     :    CASE NO.
 v.      :
       :
AMIT V. PATEL,     :
       :
 Defendant,     :

:

COMPLAINT

Plaintiff Securities and Exchange Commission (“Commission”) alleges as follows:
Nature of the Action

1. The Commission brings this civil enforcement action to halt an affinity
fraud scheme which already has imposed significant monetary losses on a number of
Minnesota residents.
2. Defendant Amit V. Patel (“Patel”) is an unemployed mechanical engineer
residing in Shorewood, Minnesota.
3. Between 2008 and 2009, Patel raised $2.5 million from four individuals
he met through Minneapolis-area Hindu temples.
4. Patel’s scheme had two parts.  First, Patel sold his investors nearly
$1.4 million of promissory notes by falsely promising to grow their money through a
low-risk stock option trading strategy.  Patel guaranteed to pay these investors fixed

monthly returns ranting from 1-2% from his trading profits, and guaranteed the
repayment of their principal.
5. However, Patel actually misappropriated at least $572,000 raised from
these investors in order to:  pay his own living expenses; repay personal debts to family,
friends, and third parties; and make the monthly payments promised to his other
investors.  Patel pooled the rest of his investors’ money, approximately $819,000, and
placed it into personal accounts at OptionsHouse, LLC (“OptionsHouse”), an online
brokerage firm located in Chicago, Illinois.
6. Second, Patel persuaded four investors to grant him “limited trading
authority” over a total of $1.1 million in additional funds they deposited in accounts at
OptionsHouse.  Patel exercised control over his investors’ brokerage accounts, and
promised to trade on their behalf using a safe and conservative strategy.
7. However, Patel actually invested all of his investors’ pooled funds, and
traded in their personal accounts, using a speculative and high risk options trading
strategy known as Iron Condor.
8. In addition to the amounts he misappropriated, Patel’s risky trading
strategy has resulted in net trading losses of at least $947,815 – which constitutes more
than 83% of his investors’ initial balances in their brokerage accounts.  Patel also lost
virtually all of the pooled funds.
9. Patel, an Indian-American and Hindu, took advantage of his cultural
affinity and shared religious heritage with his victims, and exploited their trust in his
standing in that community.

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10. Patel remains a danger to the investing public, particularly to those with
whom he shares a cultural and religious heritage.  Between 2008 and 2010, Patel
borrowed at least $2 million from dozens of other individuals, and managed at least $2
million in additional funds in numerous other OptionsHouse accounts opened by many of
these same individuals.
11. By reason of the foregoing, Patel has, directly and indirectly, engaged in
acts, practices, transactions, and courses of business that violate Section 17(a) of the
Securities Act of 1933 (the “Securities Act”), 15 U.S.C. § 77q(a), Section 10(b) of the
Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78j(b), and Rule
10b-5 thereunder, 17 C.F.R. § 240.10b-5, Section 206 of the Investment Advisers Act of
1940 (the “Advisers Act”), 15 U.S.C. § 80b-6, and Rule 206-4(8) thereunder, 17 C.F.R.
§ 275.206-4(8).  Unless Patel is enjoined by this Court, he will continue to engage in acts
transactions and courses of business that violate these provisions.
Jurisdiction and Venue

12. The Commission brings this action under Section 20(b) of the Securities
Act, 15 U.S.C. §77t(b), Sections 21(d) and 21(e) of the Exchange Act, 15 U.S.C.
§§78u(d) and 78u(e), and Section 209(d) of the Advisers Act, 15 U.S.C. § 80b-9(d).
13. This Court has jurisdiction over this action under Section 22 of the
Securities Act, 15 U.S.C. § 77v, Section 27 of the Exchange Act, 15 U.S.C. § 78aa,
Section 214 of the Advisers Act, 15 U.S.C. § 80b-14, and 28 U.S.C. § 1331.
14. Venue is proper in this Court under Section 27 of the Exchange Act, 15
U.S.C. § 78aa, because the defendant and his investors reside in Minnesota, and because

3

certain of the acts, practices and courses of business constituting violations alleged herein
have occurred within the District of Minnesota.
The Defendant

15. Amit V. Patel
 is a 49 year-old mechanical engineer.  He has been
unemployed since 2007 and resides in Shoreview, Minnesota.  Patel is a dual citizen of
the United States and India.  Patel is not registered with the Commission as an investment
adviser, or in any other capacity, and has never been associated with a brokerage firm or
any other entity registered with the Commission.
PATEL RAISED $2.5 MILLION FROM FOUR INVESTORS

16. Beginning in January 2008, Patel raised at $2.5 million from four Indian-
Americans, whom he met at Minneapolis area Hindu temples.  Patel’s scheme involved
two components.
17. First, Patel raised $1.4 million by offering an investment in promissory
notes.  More specifically:
(a) One investor gave Patel a total of $220,000 in August 2008 ($111,000);
December 2008 ($39,000); and August 2009 ($70,000).  Her checks state
that the money was for “investment” and “investment for 3 months.”
(b) In May 2008, Patel convinced a second investor to give him $100,000.  In
or around May 2009, Patel also convinced this investor to close his online
brokerage accounts which Patel then managed as part of a related account
management scheme, described below, and persuaded this individual to
give the remaining money – approximately $393,000 – directly to Patel.

4

(c) In January and March 2008, a third investor gave Patel a total of $389,000.
(d) A fourth investor gave Patel a total of $289,000 in April 2008 ($75,000),
June 2009 ($184,478.25), and October 2009 ($30,000).  His checks state
that the money was for “investment 2%” and “investment total = 180k”
(which understated the amount invested).  The largest check stated that it
was a “60 day early IRA dist.”
18. Patel signed promissory notes for each of these amounts, and made false
representations, during in-person meetings with each of his investors.  Patel expressly
promised to invest their money through a “safe” and “conservative” stock option trading
strategy, to pay his investors a fixed monthly return, ranging from 1-2% per month, from
the profits generated from his option trading, and Patel also guaranteed the repayment of
the investors’ principal.
19. Patel’s investors agreed that he could keep any profits that he generated in
excess of the promised, fixed returns.
20. Second, Patel engaged in a fraudulent account management scheme by
persuading three of the same four investors, plus at least one additional investors, to give
Patel “limited trading authority” over at least $1.1 million contained in brokerage
accounts in their own names (or the names of their family members).  More specifically:
(a) In June 2008 and January 2009, an investor gave Patel trading authority
over $635,000 (some of which he later withdrew) contained in multiple
accounts in the investor’s name.
(b) In March 2008 and April 2009, Patel convinced another investor to give

5

him trading authority over more than $290,000 contained in three accounts
in the investor’s (and his wife’s) names.
(c) In March and May 2009, another investor gave Patel trading authority over
more than $343,659 in accounts in the investor’s and his wife’s names.
(d) In April 2009, Patel convinced a fourth investor to give him trading
authority over $160,000 contained in an account in the investor’s name.
21. Patel subsequently exercised virtually complete control over the trading in
these accounts.  None of the four investors traded in their brokerage accounts after giving
Patel trading authority.
22. To induce these investors to grant him trading authority over their
accounts, Patel falsely stated that he would trade in their accounts using a “safe,”
“conservative,” and “low risk” stock option trading strategy.  Patel made these
representations in written promissory notes concerning the managed accounts, as well as
during in-person meetings with each of his investors.
23. Patel’s investors trusted him and relied on his representations in
transferring funds to him as part of an investment in promissory notes, as well as when
granting him trading authority over their own brokerage accounts.  Patel made these same
statements, promises and assurances to his investors repeatedly during the entire scheme.
Patel Misappropriated Investor Funds
and Misrepresented the Risks of Investment

24. Although Patel assured his investors that he would invest the money they
provided to him in exchange for promissory notes is a safe and conservative stock option

6

trading strategy, Patel spent at least $572,000 of the $1.4 million he raised to pay his own
personal, living expenses; to repay debts to family members and third-parties; and to
make the monthly payments he had promised to his other investors.  Patel never told
investors that their money would not be invested, and might be used in this way.
25. Patel did invest the rest of the promissory note investors’ money,
approximately $819,000, in stock options.  Patel pooled these funds into personal
brokerage accounts held in his and others’ names at OptionsHouse.
26. Patel never sent his investors periodic statements regarding their
investments, or provide them with any details about his stock option trading on their
behalf.    The investors trusted that Patel actually had invested their money in stock
options, and relied on his general descriptions of his trading results.
27. Although Patel had assured his investors that he would invest their money
using a “safe,” and “conservative,” and “low risk” stock option trading strategy, Patel
traded primarily using a speculative and high risk trading strategy known as Iron Condor.
28. Patel used the same speculative and high risk trading strategy in both his
personal brokerage accounts – where he traded the promissory note investors’ funds –
and in the accounts he managed for several of the same investors, as well as at least one
other investor.
29. Patel’s options trading was unsuccessful, and he actually lost most of the
funds obtained through the promissory note and managed account schemes.
30. Although Patel had assured investors that he would pay their fixed
monthly returns from his trading profits, Patel did not always do so.

7

31. Between February 2008 and July 2010, Patel made semi-regular
payments of approximately one million dollars to his four investors.  However, Patel used
money received from other investors to make some of these payments.
32. Patel has ceased making any payments to his investors.
33. Patel’s investors have lost a total of at least $1.2 million between the
promissory note and account management schemes, including at least $947,814 of their
initial investment balances in their managed accounts.
Patel Poses a Danger to the Investing Public

34. In addition to the four investors described in this complaint, between
2008 and 2010, Patel received more than $2 million more from dozens of other
individuals.
35. Patel also managed more than $2 million dollars contained in online
brokerage accounts at OptionsHouse for many of these same individuals.
36. Patel has stated that he maintains an extensive network of people who
know and trust him through Hindu temples and in Indian-American communities all
around the United States.
37. Patel has taken steps to establish an investment management business,
and intends to continue managing brokerage accounts on behalf of others.
38. During the Commission’s investigation into this matter, Patel has
provided his investors with misleading and incomplete information about his trading
results and his few remaining liquid assets.

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COUNT I
Violations of Securities Act Section 17(a)(1)

39. Paragraphs 1 through 38 are realleged and incorporated by reference as
though fully set forth herein.
40. By engaging in the conduct described above, in the offer and sale of
securities, by the use of the means and instruments of transportation or communication in
interstate commerce or by use of the mails, Patel, directly or indirectly, has employed
devices, schemes and artifices to defraud.
41. Patel acted with scienter.
42. By reason of the foregoing, Patel violated Section 17(a)(1) of the
Securities Act, 15 U.S.C. § 77q(a)(1).
COUNT II

Violations of Securities Act Sections 17(a)(2) and (3)

43. Paragraphs 1 through 38 are realleged and incorporated by reference as
though fully set forth herein.
44. By engaging in the conduct described above, in the offer and sale of
securities, by the use of the means and instruments of transportation or communication in
interstate commerce or by use of the mails, Patel, directly or indirectly, has:
a. obtained money or property by means of untrue statements of material fact
or by omitting to state material facts necessary in order to make the
statements made, in light of the circumstances under which they were
made, not misleading; and

9

b. engaged in transactions, practices, or courses of business that operated or
would operate as a fraud or deceit upon the purchasers of such securities.
45. By reason of the foregoing, Patel violated Sections 17(a)(2) and (3) of the
Securities Act, 15 U.S.C. §§ 77q(a)(2) and (3).
COUNT III

Violations of Exchange Act Section 10(b), and Rule 10b-5 thereunder

46. Paragraphs 1 through 38 are realleged and incorporated by reference as
though fully set forth herein.
47. By engaging in the conduct described above, in connection with the
purchase and sale of securities, by the use of the means and instrumentalities of interstate
commerce and by the use of the mails, Patel, directly and indirectly:  used and employed
devices, schemes and artifices to defraud; made untrue statements of material fact and
omitted to state material facts necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading; and engaged in acts,
practices and courses of business which operated or would have operated as a fraud and
deceit upon purchasers and sellers and prospective purchasers and sellers of securities.
48. Patel acted with scienter.
49. By reason of the foregoing, Patel violated Section 10(b) of the Exchange
Act, 15 U.S.C. §78j(b), and Rule 10b-5 thereunder, 17 C.F.R. 240.10b-5.
COUNT IV

Violations of Advisers Act Section 206(1)

50. Paragraphs 1 through 38 are realleged and incorporated by reference as
though fully set forth herein.

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51. At all times relevant to this Complaint, Patel acted as an investment
adviser to certain investors.  Patel managed those individuals’ investments in exchange
for compensation in the form of shared profits and misappropriated principal.
52. By engaging in the conduct described above, while acting as an
investment adviser, by use of the mails, and the means and instrumentalities of interstate
commerce, Patel, directly or indirectly:  (i) employed devices, schemes or artifices to
defraud its clients or prospective clients; and (ii) engaged in transactions, practices and
courses of business which have operated as a fraud or deceit upon their clients or
prospective clients.
53. Patel acted with scienter.
54. By reason of the foregoing, Patel violated Section 206(1) of the Advisers
Act, 15 U.S.C. § 80b-6(1).
COUNT V

Violations of Advisers Act Section 206(2)
55. Paragraphs 1 through 38 are realleged and incorporated by reference as
though fully set forth herein.
56. At all times relevant to this Complaint, Patel acted as an investment
adviser to the investors.  Patel managed those individuals’ investments in exchange for
compensation in the form of shared profits and misappropriated principal.
57. By engaging in the conduct described above, while acting as an
investment adviser, by use of the mails, and the means and instrumentalities of interstate
commerce, Patel, directly or indirectly:  (i) employed devices, schemes or artifices to

11

defraud its clients or prospective clients; and (ii) engaged in transactions, practices and
courses of business which have operated as a fraud or deceit upon their clients or
prospective clients.
58. By reason of the foregoing, Patel violated Section 206(2) of the Advisers
Act, 15 U.S.C. § 80b-6(2).
COUNT VI

Violations of Advisers Act Section 206(4), and Rule 206(4)-8 thereunder
59. Paragraphs 1 through 38 are realleged and incorporated by reference as
though fully set forth herein.
60. At all times relevant to this Complaint, Patel acted as an investment
adviser to brokerage accounts held solely or jointly by Patel and/or others.  Patel
managed the investments of those accounts in exchange for compensation in the form of
shared profits and misappropriated principal.
61. By engaging in the conduct described above, while acting as an
investment adviser, by use of the mails, and the means and instrumentalities of interstate
commerce, Patel, directly or indirectly engaged in acts, practices or courses of business
which are fraudulent, deceptive, or manipulative.  Patel made untrue statements of a
material fact or omitted to state a material fact necessary to make the statements made, in
the light of the circumstances under which they were made, not misleading, to any
investor or prospective investor in the pooled investment vehicle, and otherwise engaged
in acts, practices or courses of business that was fraudulent, deceptive, or manipulative
with respect to any investor or prospective investor in the pooled investment vehicle.

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62. By reason of the foregoing, Patel violated Section 206(4) of the Advisers
Act, 15 U.S.C. § 80b-6(4), and Rule 206(4)-8 thereunder, 17 C.F.R. 275.206(4)-8.
Relief Requested

           WHEREFORE,           the Commission respectfully requests that this Court:
I.
 Find Defendant Amit V. Patel liable for the violations charged herein.
II.
 Issue a Permanent Injunction, in a form consistent with Rule 65(d) of the Federal
Rules of Civil Procedure, restraining and enjoining Defendant Amit V. Patel, his agents,
servants, employees, attorneys and those persons in active concert or participation with
him who receive actual notice of the Orders, by personal service or otherwise, and each
of them from, directly or indirectly, engaging in the transactions, acts, practices or
courses of business described above, or in conduct of similar purport and object, in
violation of Section 17(a) of the Securities Act, 15 U.S.C. §§ 77q(a), Section 10(b) of the
Exchange Act, 15 U.S.C. § 78j, and Rule 10b-5 thereunder, 17 CFR § 240.10b-5,
Sections 206(1), 206(2), and 206(4) of the Advisers Act, 15 U.S.C. §§ 80b-6(1), 80b-
6(2), and 80b-6(4), and Rule 206-4(8) thereunder, 17 C.F.R. § 275.206(4)-8.
III.
Issue an Order requiring Defendant Amit V. Patel to disgorge the ill-gotten gains
he received as a result of the violations alleged in this Complaint, including prejudgment
interest.

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IV.
Issue an Order imposing on Defendant Amit V. Patel an appropriate civil penalty
under Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d), Section 21(d)(3) of the
Exchange Act, 15 U.S.C. § 78u(d)(3), and Section 209(e) of the Advisers Act, 15 U.S.C.
§ 80b-9(e).
V.
 Retain jurisdiction of this action in accordance with the principles of equity and
the Federal Rules of Civil Procedure in order to implement and carry out the terms of all
orders and decrees that may be entered or to entertain any suitable application or motion
for additional relief within the jurisdiction of this Court.
VI.
Grant an Order for any other relief this Court deems appropriate.

December 20, 2010
/s/Robert M. Moye

Robert M. Moye (IL Bar No. 6285688)
Brian Neil Hoffman (CO Bar No. 32999)
U.S. Securities and Exchange Commission
Chicago Regional Office
175 West Jackson Blvd, Suite 900
Chicago, Illinois 60604
(312) 353-7390

Greg Brooker (MN Bar No. 166066)
Assistant United States Attorney
600 U.S. Courthouse
300 South Fourth Street
Minneapolis, MN  55415
(612) 664-5600

              Attorneys for the Plaintiff

UNITED STATES DISTRICT COURT 
FOR THE DISTRICT OF MINNESOTA 

_______________________________________ 
     : 

SECURITIES AND EXCHANGE  : 
COMMISSION,     : 
       : 
 Plaintiff,     : 

     :    CASE NO.  
 v.      : 
       : 
AMIT V. PATEL,     : 
       : 
 Defendant,     : 
                                                                              : 
 

COMPLAINT 
 

Plaintiff Securities and Exchange Commission (“Commission”) alleges as follows: 

Nature of the Action 

1. The Commission brings this civil enforcement action to halt an affinity 

fraud scheme which already has imposed significant monetary losses on a number of 

Minnesota residents.   

2. Defendant Amit V. Patel (“Patel”) is an unemployed mechanical engineer 

residing in Shorewood, Minnesota.   

3. Between 2008 and 2009, Patel raised $2.5 million from four individuals 

he met through Minneapolis-area Hindu temples.   

4. Patel’s scheme had two parts.  First, Patel sold his investors nearly 

$1.4 million of promissory notes by falsely promising to grow their money through a 

low-risk stock option trading strategy.  Patel guaranteed to pay these investors fixed 

CASE 0:10-cv-04937-RHK -FLN   Document 1    Filed 12/20/10   Page 1 of 14



monthly returns ranting from 1-2% from his trading profits, and guaranteed the 

repayment of their principal.   

5. However, Patel actually misappropriated at least $572,000 raised from 

these investors in order to:  pay his own living expenses; repay personal debts to family, 

friends, and third parties; and make the monthly payments promised to his other 

investors.  Patel pooled the rest of his investors’ money, approximately $819,000, and 

placed it into personal accounts at OptionsHouse, LLC (“OptionsHouse”), an online 

brokerage firm located in Chicago, Illinois.   

6. Second, Patel persuaded four investors to grant him “limited trading 

authority” over a total of $1.1 million in additional funds they deposited in accounts at 

OptionsHouse.  Patel exercised control over his investors’ brokerage accounts, and 

promised to trade on their behalf using a safe and conservative strategy.    

7. However, Patel actually invested all of his investors’ pooled funds, and 

traded in their personal accounts, using a speculative and high risk options trading 

strategy known as Iron Condor.     

8. In addition to the amounts he misappropriated, Patel’s risky trading 

strategy has resulted in net trading losses of at least $947,815 – which constitutes more 

than 83% of his investors’ initial balances in their brokerage accounts.  Patel also lost 

virtually all of the pooled funds. 

9. Patel, an Indian-American and Hindu, took advantage of his cultural 

affinity and shared religious heritage with his victims, and exploited their trust in his 

standing in that community.   

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10. Patel remains a danger to the investing public, particularly to those with 

whom he shares a cultural and religious heritage.  Between 2008 and 2010, Patel 

borrowed at least $2 million from dozens of other individuals, and managed at least $2 

million in additional funds in numerous other OptionsHouse accounts opened by many of 

these same individuals.     

11. By reason of the foregoing, Patel has, directly and indirectly, engaged in 

acts, practices, transactions, and courses of business that violate Section 17(a) of the 

Securities Act of 1933 (the “Securities Act”), 15 U.S.C. § 77q(a), Section 10(b) of the 

Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78j(b), and Rule 

10b-5 thereunder, 17 C.F.R. § 240.10b-5, Section 206 of the Investment Advisers Act of 

1940 (the “Advisers Act”), 15 U.S.C. § 80b-6, and Rule 206-4(8) thereunder, 17 C.F.R. 

§ 275.206-4(8).  Unless Patel is enjoined by this Court, he will continue to engage in acts 

transactions and courses of business that violate these provisions. 

Jurisdiction and Venue 

12. The Commission brings this action under Section 20(b) of the Securities 

Act, 15 U.S.C. §77t(b), Sections 21(d) and 21(e) of the Exchange Act, 15 U.S.C. 

§§78u(d) and 78u(e), and Section 209(d) of the Advisers Act, 15 U.S.C. § 80b-9(d). 

13. This Court has jurisdiction over this action under Section 22 of the 

Securities Act, 15 U.S.C. § 77v, Section 27 of the Exchange Act, 15 U.S.C. § 78aa, 

Section 214 of the Advisers Act, 15 U.S.C. § 80b-14, and 28 U.S.C. § 1331. 

14. Venue is proper in this Court under Section 27 of the Exchange Act, 15 

U.S.C. § 78aa, because the defendant and his investors reside in Minnesota, and because 

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certain of the acts, practices and courses of business constituting violations alleged herein 

have occurred within the District of Minnesota. 

The Defendant 

15. Amit V. Patel is a 49 year-old mechanical engineer.  He has been 

unemployed since 2007 and resides in Shoreview, Minnesota.  Patel is a dual citizen of 

the United States and India.  Patel is not registered with the Commission as an investment 

adviser, or in any other capacity, and has never been associated with a brokerage firm or 

any other entity registered with the Commission.   

PATEL RAISED $2.5 MILLION FROM FOUR INVESTORS 
 

16. Beginning in January 2008, Patel raised at $2.5 million from four Indian-

Americans, whom he met at Minneapolis area Hindu temples.  Patel’s scheme involved 

two components. 

17. First, Patel raised $1.4 million by offering an investment in promissory 

notes.  More specifically: 

(a) One investor gave Patel a total of $220,000 in August 2008 ($111,000); 

December 2008 ($39,000); and August 2009 ($70,000).  Her checks state 

that the money was for “investment” and “investment for 3 months.” 

(b) In May 2008, Patel convinced a second investor to give him $100,000.  In 

or around May 2009, Patel also convinced this investor to close his online 

brokerage accounts which Patel then managed as part of a related account 

management scheme, described below, and persuaded this individual to 

give the remaining money – approximately $393,000 – directly to Patel. 

 4

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(c) In January and March 2008, a third investor gave Patel a total of $389,000.   

(d) A fourth investor gave Patel a total of $289,000 in April 2008 ($75,000), 

June 2009 ($184,478.25), and October 2009 ($30,000).  His checks state 

that the money was for “investment 2%” and “investment total = 180k” 

(which understated the amount invested).  The largest check stated that it 

was a “60 day early IRA dist.”   

18. Patel signed promissory notes for each of these amounts, and made false 

representations, during in-person meetings with each of his investors.  Patel expressly 

promised to invest their money through a “safe” and “conservative” stock option trading 

strategy, to pay his investors a fixed monthly return, ranging from 1-2% per month, from 

the profits generated from his option trading, and Patel also guaranteed the repayment of 

the investors’ principal.   

19. Patel’s investors agreed that he could keep any profits that he generated in 

excess of the promised, fixed returns.   

20. Second, Patel engaged in a fraudulent account management scheme by 

persuading three of the same four investors, plus at least one additional investors, to give 

Patel “limited trading authority” over at least $1.1 million contained in brokerage 

accounts in their own names (or the names of their family members).  More specifically:   

(a) In June 2008 and January 2009, an investor gave Patel trading authority 

over $635,000 (some of which he later withdrew) contained in multiple 

accounts in the investor’s name. 

(b) In March 2008 and April 2009, Patel convinced another investor to give 

 5

CASE 0:10-cv-04937-RHK -FLN   Document 1    Filed 12/20/10   Page 5 of 14



him trading authority over more than $290,000 contained in three accounts 

in the investor’s (and his wife’s) names. 

(c) In March and May 2009, another investor gave Patel trading authority over 

more than $343,659 in accounts in the investor’s and his wife’s names.   

(d) In April 2009, Patel convinced a fourth investor to give him trading 

authority over $160,000 contained in an account in the investor’s name.   

21. Patel subsequently exercised virtually complete control over the trading in 

these accounts.  None of the four investors traded in their brokerage accounts after giving 

Patel trading authority.   

22. To induce these investors to grant him trading authority over their 

accounts, Patel falsely stated that he would trade in their accounts using a “safe,” 

“conservative,” and “low risk” stock option trading strategy.  Patel made these 

representations in written promissory notes concerning the managed accounts, as well as 

during in-person meetings with each of his investors. 

23. Patel’s investors trusted him and relied on his representations in 

transferring funds to him as part of an investment in promissory notes, as well as when 

granting him trading authority over their own brokerage accounts.  Patel made these same 

statements, promises and assurances to his investors repeatedly during the entire scheme. 

Patel Misappropriated Investor Funds 
and Misrepresented the Risks of Investment 

 
24. Although Patel assured his investors that he would invest the money they 

provided to him in exchange for promissory notes is a safe and conservative stock option 

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trading strategy, Patel spent at least $572,000 of the $1.4 million he raised to pay his own 

personal, living expenses; to repay debts to family members and third-parties; and to 

make the monthly payments he had promised to his other investors.  Patel never told 

investors that their money would not be invested, and might be used in this way. 

25. Patel did invest the rest of the promissory note investors’ money, 

approximately $819,000, in stock options.  Patel pooled these funds into personal 

brokerage accounts held in his and others’ names at OptionsHouse.   

26. Patel never sent his investors periodic statements regarding their 

investments, or provide them with any details about his stock option trading on their 

behalf.    The investors trusted that Patel actually had invested their money in stock 

options, and relied on his general descriptions of his trading results. 

27. Although Patel had assured his investors that he would invest their money 

using a “safe,” and “conservative,” and “low risk” stock option trading strategy, Patel 

traded primarily using a speculative and high risk trading strategy known as Iron Condor.   

28. Patel used the same speculative and high risk trading strategy in both his 

personal brokerage accounts – where he traded the promissory note investors’ funds – 

and in the accounts he managed for several of the same investors, as well as at least one 

other investor.   

29. Patel’s options trading was unsuccessful, and he actually lost most of the 

funds obtained through the promissory note and managed account schemes. 

30. Although Patel had assured investors that he would pay their fixed 

monthly returns from his trading profits, Patel did not always do so. 

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31. Between February 2008 and July 2010, Patel made semi-regular 

payments of approximately one million dollars to his four investors.  However, Patel used 

money received from other investors to make some of these payments.   

32. Patel has ceased making any payments to his investors. 

33. Patel’s investors have lost a total of at least $1.2 million between the 

promissory note and account management schemes, including at least $947,814 of their 

initial investment balances in their managed accounts.   

Patel Poses a Danger to the Investing Public 
 

34. In addition to the four investors described in this complaint, between 

2008 and 2010, Patel received more than $2 million more from dozens of other 

individuals.   

35. Patel also managed more than $2 million dollars contained in online 

brokerage accounts at OptionsHouse for many of these same individuals.   

36. Patel has stated that he maintains an extensive network of people who 

know and trust him through Hindu temples and in Indian-American communities all 

around the United States.   

37. Patel has taken steps to establish an investment management business, 

and intends to continue managing brokerage accounts on behalf of others.   

38. During the Commission’s investigation into this matter, Patel has 

provided his investors with misleading and incomplete information about his trading 

results and his few remaining liquid assets. 

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COUNT I 
Violations of Securities Act Section 17(a)(1) 

 
39. Paragraphs 1 through 38 are realleged and incorporated by reference as 

though fully set forth herein. 

40. By engaging in the conduct described above, in the offer and sale of 

securities, by the use of the means and instruments of transportation or communication in 

interstate commerce or by use of the mails, Patel, directly or indirectly, has employed 

devices, schemes and artifices to defraud. 

41. Patel acted with scienter.   

42. By reason of the foregoing, Patel violated Section 17(a)(1) of the 

Securities Act, 15 U.S.C. § 77q(a)(1). 

COUNT II 
Violations of Securities Act Sections 17(a)(2) and (3) 

 
43. Paragraphs 1 through 38 are realleged and incorporated by reference as 

though fully set forth herein. 

44. By engaging in the conduct described above, in the offer and sale of 

securities, by the use of the means and instruments of transportation or communication in 

interstate commerce or by use of the mails, Patel, directly or indirectly, has: 

a. obtained money or property by means of untrue statements of material fact 

or by omitting to state material facts necessary in order to make the 

statements made, in light of the circumstances under which they were 

made, not misleading; and  

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b. engaged in transactions, practices, or courses of business that operated or 

would operate as a fraud or deceit upon the purchasers of such securities.    

45. By reason of the foregoing, Patel violated Sections 17(a)(2) and (3) of the 

Securities Act, 15 U.S.C. §§ 77q(a)(2) and (3). 

COUNT III 
Violations of Exchange Act Section 10(b), and Rule 10b-5 thereunder 

 
46. Paragraphs 1 through 38 are realleged and incorporated by reference as 

though fully set forth herein. 

47. By engaging in the conduct described above, in connection with the 

purchase and sale of securities, by the use of the means and instrumentalities of interstate 

commerce and by the use of the mails, Patel, directly and indirectly:  used and employed 

devices, schemes and artifices to defraud; made untrue statements of material fact and 

omitted to state material facts necessary in order to make the statements made, in light of 

the circumstances under which they were made, not misleading; and engaged in acts, 

practices and courses of business which operated or would have operated as a fraud and 

deceit upon purchasers and sellers and prospective purchasers and sellers of securities. 

48. Patel acted with scienter. 

49. By reason of the foregoing, Patel violated Section 10(b) of the Exchange 

Act, 15 U.S.C. §78j(b), and Rule 10b-5 thereunder, 17 C.F.R. 240.10b-5. 

COUNT IV 
Violations of Advisers Act Section 206(1) 

 
50. Paragraphs 1 through 38 are realleged and incorporated by reference as 

though fully set forth herein. 

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51. At all times relevant to this Complaint, Patel acted as an investment 

adviser to certain investors.  Patel managed those individuals’ investments in exchange 

for compensation in the form of shared profits and misappropriated principal. 

52. By engaging in the conduct described above, while acting as an 

investment adviser, by use of the mails, and the means and instrumentalities of interstate 

commerce, Patel, directly or indirectly:  (i) employed devices, schemes or artifices to 

defraud its clients or prospective clients; and (ii) engaged in transactions, practices and 

courses of business which have operated as a fraud or deceit upon their clients or 

prospective clients. 

53. Patel acted with scienter. 

54. By reason of the foregoing, Patel violated Section 206(1) of the Advisers 

Act, 15 U.S.C. § 80b-6(1). 

COUNT V 
Violations of Advisers Act Section 206(2) 

55. Paragraphs 1 through 38 are realleged and incorporated by reference as 

though fully set forth herein. 

56. At all times relevant to this Complaint, Patel acted as an investment 

adviser to the investors.  Patel managed those individuals’ investments in exchange for 

compensation in the form of shared profits and misappropriated principal. 

57. By engaging in the conduct described above, while acting as an 

investment adviser, by use of the mails, and the means and instrumentalities of interstate 

commerce, Patel, directly or indirectly:  (i) employed devices, schemes or artifices to 

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defraud its clients or prospective clients; and (ii) engaged in transactions, practices and 

courses of business which have operated as a fraud or deceit upon their clients or 

prospective clients. 

58. By reason of the foregoing, Patel violated Section 206(2) of the Advisers 

Act, 15 U.S.C. § 80b-6(2). 

COUNT VI 
Violations of Advisers Act Section 206(4), and Rule 206(4)-8 thereunder 

59. Paragraphs 1 through 38 are realleged and incorporated by reference as 

though fully set forth herein. 

60. At all times relevant to this Complaint, Patel acted as an investment 

adviser to brokerage accounts held solely or jointly by Patel and/or others.  Patel 

managed the investments of those accounts in exchange for compensation in the form of 

shared profits and misappropriated principal. 

61. By engaging in the conduct described above, while acting as an 

investment adviser, by use of the mails, and the means and instrumentalities of interstate 

commerce, Patel, directly or indirectly engaged in acts, practices or courses of business 

which are fraudulent, deceptive, or manipulative.  Patel made untrue statements of a 

material fact or omitted to state a material fact necessary to make the statements made, in 

the light of the circumstances under which they were made, not misleading, to any 

investor or prospective investor in the pooled investment vehicle, and otherwise engaged 

in acts, practices or courses of business that was fraudulent, deceptive, or manipulative 

with respect to any investor or prospective investor in the pooled investment vehicle. 

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62. By reason of the foregoing, Patel violated Section 206(4) of the Advisers 

Act, 15 U.S.C. § 80b-6(4), and Rule 206(4)-8 thereunder, 17 C.F.R. 275.206(4)-8. 

Relief Requested 

 WHEREFORE, the Commission respectfully requests that this Court: 

I.  

 Find Defendant Amit V. Patel liable for the violations charged herein. 

II.  

 Issue a Permanent Injunction, in a form consistent with Rule 65(d) of the Federal 

Rules of Civil Procedure, restraining and enjoining Defendant Amit V. Patel, his agents, 

servants, employees, attorneys and those persons in active concert or participation with 

him who receive actual notice of the Orders, by personal service or otherwise, and each 

of them from, directly or indirectly, engaging in the transactions, acts, practices or 

courses of business described above, or in conduct of similar purport and object, in 

violation of Section 17(a) of the Securities Act, 15 U.S.C. §§ 77q(a), Section 10(b) of the 

Exchange Act, 15 U.S.C. § 78j, and Rule 10b-5 thereunder, 17 CFR § 240.10b-5, 

Sections 206(1), 206(2), and 206(4) of the Advisers Act, 15 U.S.C. §§ 80b-6(1), 80b-

6(2), and 80b-6(4), and Rule 206-4(8) thereunder, 17 C.F.R. § 275.206(4)-8.  

III. 

Issue an Order requiring Defendant Amit V. Patel to disgorge the ill-gotten gains 

he received as a result of the violations alleged in this Complaint, including prejudgment 

interest. 

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 14

IV. 

Issue an Order imposing on Defendant Amit V. Patel an appropriate civil penalty 

under Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d), Section 21(d)(3) of the 

Exchange Act, 15 U.S.C. § 78u(d)(3), and Section 209(e) of the Advisers Act, 15 U.S.C. 

§ 80b-9(e). 

V. 

 Retain jurisdiction of this action in accordance with the principles of equity and 

the Federal Rules of Civil Procedure in order to implement and carry out the terms of all 

orders and decrees that may be entered or to entertain any suitable application or motion 

for additional relief within the jurisdiction of this Court. 

VI. 

Grant an Order for any other relief this Court deems appropriate. 

 
December 20, 2010 /s/Robert M. Moye 
 
 
 

Robert M. Moye (IL Bar No. 6285688) 
Brian Neil Hoffman (CO Bar No. 32999) 
U.S. Securities and Exchange Commission 
Chicago Regional Office 
175 West Jackson Blvd, Suite 900 
Chicago, Illinois 60604 
(312) 353-7390 
 
Greg Brooker (MN Bar No. 166066) 
Assistant United States Attorney 
600 U.S. Courthouse 
300 South Fourth Street 
Minneapolis, MN  55415 
(612) 664-5600 

 
              Attorneys for the Plaintiff 

CASE 0:10-cv-04937-RHK -FLN   Document 1    Filed 12/20/10   Page 14 of 14


	The Defendant