SEC v. HGI, Inc.; Mark Hanna; Brian Scanlon; Stephen Palumbo; Angelo John Bosco; Thomas Fede, et al., No. LR-16315, Southern District of New York (Sept. 29, 1999) — Press Release
raw: HGI, Inc., Mark Hanna, Brian Scanlon, Stephen Palumbo, Angelo John Bosco, Thomas Fede, Shane Ferras, Scott Follett, Joseph Tuozzo, Steven Arevalo, Steven Hanna, Paul Karkenny, Robert Palumbo, and Raymond Saulon
HGI, Inc., Mark Hanna, Brian Scanlon, Stephen Palumbo, Angelo John Bosco, Thomas Fede, Shane Ferras, Scott Follett, Joseph Tuozzo, Steven Arevalo, Steven Hanna, Paul Karkenny, Robert Palumbo, and Raymond Saulon, No. LR-16315 (S.D.N.Y. Sept. 29, 1999)
HGI, Inc., a registered broker-dealer, was defaulted and ordered to pay over $90 million in disgorgement and interest for operating a boiler-room fraud scheme that deceived investors into buying speculative IPO and market-maker securities through illegal sales practices, while litigation against 13 individual defendants remains pending.
The SEC charged HGI, Inc. and 13 of its registered representatives with operating a fraudulent boiler-room scheme that misled investors into purchasing highly speculative securities issued in IPOs or for which HGI acted as market maker. HGI was found liable by default and ordered to disgorge $68,657,246 in illegal profits plus $21,601,227.83 in prejudgment interest, totaling over $90 million, for violating Sections 5(b), 17(a), 10(b), and 15(b)(7) of the Securities Act and Exchange Act, along with Rules 10b-5, 15b7-1, and Regulation M. The court permanently enjoined HGI from anti-fraud violations, failing to deliver prospectuses, and using unregistered brokers, while litigation against the 13 individuals continues.
The Securities and Exchange Commission filed a complaint on May 27, 1999, alleging that HGI, Inc., a registered broker-dealer, and 13 of its registered representatives engaged in a systematic boiler-room fraud scheme to defraud investors by pushing highly speculative securities from initial public offerings and market-making activities through deceptive sales tactics. On September 24, 1999, the U.S. District Court for the Southern District of New York entered a default judgment against HGI, permanently enjoining it from violating anti-fraud provisions, failing to deliver required prospectuses, and effecting transactions through unregistered brokers under Sections 5(b) and 17(a) of the Securities Act and Sections 10(b) and 15(b)(7) of the Exchange Act, along with Rules 10b-5, 15b7-1, and Regulation M. The court ordered HGI to disgorge $68,657,246 in illegal profits and pay $21,601,227.83 in prejudgment interest, totaling over $90 million. The fraudulent practices involved pressuring investors with false or misleading information to buy illiquid, high-risk securities that generated substantial commissions for HGI and its representatives. While HGI has been held financially accountable through the default judgment, litigation against the 13 individual defendants remains ongoing. The case underscores the SEC’s enforcement focus on boiler-room operations exploiting unregistered sales tactics and prospectus violations to prey on retail investors. This action marked one of the largest disgorgement orders against a broker-dealer for systemic fraud at the time.
Extracted insights
- $90.00M $90 million $10M–$100M
- $68.66M $68,657,246 $10M–$100M
- $21.60M $21,601,227 $10M–$100M
- company a final judgment by default against hgi, inc.
- person angelo john bosco
- person brian scanlon
- person denise l. cote
- organization Hgi Inc
- person joseph tuozzo
- person judge denise l. cote
- person mark hanna
- person paul karkenny
- person raymond saulon
- person robert palumbo
- person scott follett
- agency Securities and Exchange Commission
- person shane ferras
- person stephen palumbo
- person steven arevalo
- person steven hanna
- company that judge denise l. cote entered a final judgment by default against hgi, inc.
- person thomas fede
- organization United States District Court For The Southern District Of New York
- Securities and Exchange Commission announced that Judge Denise L. Cote entered a Final Judgment By Default against HGI, Inc.
- Judge Denise L. Cote entered a Final Judgment By Default against HGI, Inc.
- Court ordered HGI to pay more than $90 million
- Commission's Complaint charged HGI and 13 registered representatives with systematically defrauding investors of millions of dollars
Litigation Release No. 16315 / September 29, 1999 Securities and Exchange Commission v. HGI, Inc., Mark Hanna, Brian Scanlon, Stephen Palumbo, Angelo John Bosco, Thomas Fede, Shane Ferras, Scott Follett, Joseph Tuozzo, Steven Arevalo, Steven Hanna, Paul Karkenny, Robert Palumbo, and Raymond Saulon, 99 Civ. 3866 (DLC) (S.D.N.Y.) The Securities and Exchange Commission announced that on September 24, 1999, the Honorable Denise L. Cote of the United States District Court for the Southern District of New York entered a Final Judgment By Default against defendant HGI, Inc. ("HGI"), a registered broker-dealer. The Final Judgment permanently enjoins HGI from: 1) violating the anti-fraud provisions; 2) failing to deliver prospectuses to customers who purchase stock; and 3) effecting securities transactions through employees who are unregistered brokers, in violation of Sections 5(b) and 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(b)(7) of the Securities Exchange Act of 1934, and Rules 10b-5 and 15b7-1 and Rules 101 and 102 of Regulation M, thereunder. The court ordered HGI to pay more than $90 million, representing disgorgment of $68,657,246 in illegal profits plus prejudgment interest of $21,601,227.83. The Commission's Complaint, filed on May 27, 1999, charged HGI and 13 of its registered representatives with systematically defrauding investors of millions of dollars by using fraudulent "boiler-room" sales practices to induce investors to purchase highly speculative securities that were issued in initial public offerings underwritten by the brokerage firm or securities for which the firm acted as a market maker. Litigation against the 13 individual defendants is pending.Litigation Release No. 16315 / September 29, 1999 Securities and Exchange Commission v. HGI, Inc., Mark Hanna, Brian Scanlon, Stephen Palumbo, Angelo John Bosco, Thomas Fede, Shane Ferras, Scott Follett, Joseph Tuozzo, Steven Arevalo, Steven Hanna, Paul Karkenny, Robert Palumbo, and Raymond Saulon, 99 Civ. 3866 (DLC) (S.D.N.Y.) The Securities and Exchange Commission announced that on September 24, 1999, the Honorable Denise L. Cote of the United States District Court for the Southern District of New York entered a Final Judgment By Default against defendant HGI, Inc. ("HGI"), a registered broker-dealer. The Final Judgment permanently enjoins HGI from: 1) violating the anti-fraud provisions; 2) failing to deliver prospectuses to customers who purchase stock; and 3) effecting securities transactions through employees who are unregistered brokers, in violation of Sections 5(b) and 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(b)(7) of the Securities Exchange Act of 1934, and Rules 10b-5 and 15b7-1 and Rules 101 and 102 of Regulation M, thereunder. The court ordered HGI to pay more than $90 million, representing disgorgment of $68,657,246 in illegal profits plus prejudgment interest of $21,601,227.83. The Commission's Complaint, filed on May 27, 1999, charged HGI and 13 of its registered representatives with systematically defrauding investors of millions of dollars by using fraudulent "boiler-room" sales practices to induce investors to purchase highly speculative securities that were issued in initial public offerings underwritten by the brokerage firm or securities for which the firm acted as a market maker. Litigation against the 13 individual defendants is pending.