SEC v. SEROFIM MUROFF; BLACKHAWK MANAGER, LLC; ISR CAPITAL, LLC; EQUITY RECAP ACCOUNT, LLC; and DEBRA L. RIDDLE, No. 1:17-cv-00180, District of Idaho (Apr. 28, 2017) — Complaint

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JINA CHOI (NY Bar No. 2699718)
ERIN E. SCHNEIDER (Cal. Bar No. 216114)
STEVEN D. BUCHHOLZ (Cal. Bar No. 202638)
   [email protected]
ALICE L. JENSEN (Cal. Bar No. 203327)
   [email protected]
WADE M. RHYNE (Cal. Bar No. 216799)
   [email protected]

Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
44 Montgomery Street, Suite 2800
San Francisco, California  94104
Telephone:  (415) 705-2500
Facsimile:  (415) 705-2501

UNITED STATES DISTRICT COURT

DISTRICT OF IDAHO

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,
 C.A. No. __-____ (ABC)
v.

SEROFIM MUROFF, BLACKHAWK
MANAGER, LLC, ISR CAPITAL, LLC,
EQUITY RECAP ACCOUNT, LLC and
DEBRA L. RIDDLE,

Defendants.
COMPLAINT

Plaintiff Securities and Exchange Commission (“Commission” or “SEC”) alleges:
SUMMARY OF ACTION
1. Beginning in or about May 2010 and continuing through 2013, defendants
Serofim Muroff (“Muroff”) and his affiliated entities Blackhawk Manager, LLC (“Blackhawk
Manager”) and ISR Capital,  LLC (“ISR C apital”) raised approximately $140.5 million from over

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280 foreign investors through the sale of securities in Blackhawk Gold, LLC and Quartzburg
Gold, LP (the “Funds”).    Both offerings were sponsored by Muroff’s Idaho State Regional
Center pursuant to the EB-5 Program, which is administered by the United States Citizenship
and Immigration Services (“USCIS”) and provides an opportunity for foreign nationals to
petition for United States residency if they make a qualified investment in a specified project that
is determined to have created or preserved at least ten jobs for United States workers.
2. Although he invested some of the money raised through the Funds for the
purposes described in the offering materials—a real estate development and gold mining
ventures—Muroff, through Blackhawk Manager and ISR Capital, misappropriated and misused
investor funds from both offerings.  Muroff used a total of approximately $5 million for personal
purposes, including $1.1 million to purchase two residential properties, $423,000 to invest in a
zip line operation in Washington state, $47,000 to purchase a Range Rover, $40,000 to purchase
a BMW, and $97,000 for personal living expenses.  He engaged in a series of acts designed to
hide his misappropriation from both investors and USCIS, including secretly using investor
funds t o purchase the real estate and mining assets for himself and then “selling” them back to
investors at an inflated price so he could pocket the profit.
3. Muroff also improperly diverted $20 million of investor money to invest in an
options trading strategy which resulted in the loss of more than $1 million through market losses
and adviser fees, none of which was disclosed to investors.  And, Muroff misused $5.6 million in
investor funds to pay commissions to a company in Taiwan that solicited investors in China.
These payments were improper and undermined the job-creating purposes of the EB-5 Program
because the commissions did not contribute to job creation in the United States.
4. Defendant Debra Louise Riddle (“Riddle”) held the title of Chief Financial

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Officer of ISR Capital, but in essence worked as a bookkeeper and administrative assistant for
Muroff.  From 2010 to 2014, she facilitated Muroff’s fraudulent scheme and misappropriation
by, among other things, funneling investor money from the Funds to Muroff’s wholly-owned
company, Equity Recap Account, LLC (“Equity Recap”), and then to Muroff for personal
purposes and to the company that solicited investors in China.
5. Defendants Muroff, Blackhawk Manager, ISR Capital and Equity Recap violated
the antifraud provisions of Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15
U.S.C. § 77q(a)] and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15
U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5] by engaging in a fraudulent
scheme, and defendant Riddle violated the antifraud provisions of Section 17(a)(3) of the
Securities Act [15 U.S.C. § 77q(a)(3)], while offering and selling interests in the Funds.
6. By virtue of their management of Blackhawk Gold and Quartzburg Gold,
defendants Muroff, Blackhawk Manager and ISR Capital are investment advisers and violated
Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 (“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] by making material misrepresentations, engaging in a fraudulent scheme, and
breaching their fiduciary duties to the Funds and their investors.
JURISDICTION AND VENUE
7. The Commission brings this action pursuant to Sections 20(b), 20(d) and 22(a) of
the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t(b), 77t(d) and 77v(a)]; Sections
21(d), 21(e) and 27 of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§
78u(d), 78u(e) and 78aa]; and Sections 209(c), 209(d) and 209(e) of the Investment Advisers Act
of 1940 (“Advisers Act”) [15 U.S.C. §§ 80b-9(c), 80b-9(d) and 80b-9(e)].

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8. Defendants, directly or indirectly, made use of the means and instrumentalities of
interstate commerce or of the mails in connection with the acts, transactions, practices, and
courses of business alleged in this Complaint.
9. Venue is proper in this District pursuant to Section 22(a) of the Securities Act [15
U.S.C. § 77v(a)], Section 27(a) of the Exchange Act [15 U.S.C. § 78aa(a)], and Section 214 of
the Advisers Act [15 U.S.C. § 80b-14].  During the period described in this Complaint,
defendants Blackhawk Manager, ISR C apital, and Equity Recap have maintained their principal
places of business in Idaho.  Defendants Muroff and Riddle also reside in this District.  In
addition, acts, practices, transactions, and courses of business that form the basis for the
violations alleged in this Complaint occurred in this District.
DEFENDANTS
10. Defendant Serofim Muroff, age 40 of Boise, Idaho, is the Chief Executive Officer
of Blackhawk Manager and the Idaho State Regional Center, as well as the principal of ISR
Capital and Equity Recap.
11. Defendant Debra Louise Riddle, age 56 of Boise, Idaho, held the title of Chief
Financial Officer of ISR Capital and worked as a bookkeeper and administrative assistant for
Muroff, ISR Capital, Blackhawk Manager, and Equity Recap from 2010 to 2014.
12. Defendant Blackhawk Manager, LLC is an Idaho limited liability company
organized in 2009 with its principal place of business in Boise, Idaho.  Blackhawk Manager is
owned and controlled by Muroff.  Blackhawk Manager is the managing member and serves as
investment adviser to Blackhawk Gold, selecting and overseeing investments in a residential and
recreational real estate development in McCall, Idaho and gold mining companies in Idaho.
13. Defendant ISR Capital, LLC is an Idaho limited liability company organized in

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2009 with its principal place of business in Boise, Idaho.  ISR Capital is controlled and part-
owned by Muroff and serves as investment adviser to Quartzburg Gold, selecting and overseeing
investments in mining-related companies in Idaho and Montana.
14. Defendant Equity Recap Account, LLC is an Idaho limited liability company
formed in 2011 with its principal place of business in Boise, Idaho.  Equity Recap is owned and
controlled by Muroff and he used Equity Recap to misappropriate investor funds from
Blackhawk Gold and Quartzburg Gold for personal purposes.
FACTUAL ALLEGATIONS
A. MUROFF’S MISAPPROPRIATION AND MISUSE OF INVESTOR
FUNDS FROM BLACKHAWK GOLD
15. From 2010 to 2012, Muroff and Blackhawk Manager raised $62.5 million from
129 foreign investors, primarily from China, through Blackhawk Gold.  According to the
Blackhawk Gold private placement memorandum (“PPM”) given to investors, as much as $20
million from the offering would be used to acquire and complete a McCall, Idaho real estate
development project from companies affiliated with Muroff.  The Blackhawk Gold PPM further
stated that as much as $40 million from the offering would be used to acquire interests in
companies affiliated with Muroff that engaged in gold mining ventures in Idaho.
16. The PPM and operating agreement for Blackhawk Gold, which were provided to
investors and incorporated in their immigration petitions filed with USCIS, provided that
Blackhawk Manager was the Managing Member of Blackhawk Gold, that Muroff was the
manager of Blackhawk Manager, and that Blackhawk Manager “shall be responsible for, and
have complete authority and discretion in, the management of the Company’s business” and
“shall follow the investment guidelines set forth in the PPM in connection with acquisition and
disposition of Properties.”  Blackhawk Manager and Muroff advised Blackhawk Gold on its

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investments in mining companies, which consisted of membership, limited partnership, or equity
interests, and they were entitled to compensation for these services.
17. While Muroff held interests in companies affiliated with the real estate
development and gold mining projects, his companies did not own the primary assets underlying
the projects.  As part of his scheme, Muroff misappropriated millions of dollars of investor
money to acquire the assets for his own companies and then “sold” the interests he acquired back
to the investors at a higher price.  Although the Blackhawk Gold PPM disclosed that Muroff
would sell his interest in the real estate development to the Fund, Muroff never disclosed to
investors that he would use their money to purchase assets for his company first and then sell
them back to the investors.
18. For example, Muroff used $7.8 million of investor funds taken from Blackhawk
Gold (which he funneled through Equity Recap to his business associate) to acquire a real estate
development in McCall, Idaho.  Rather than title the development in the name of Blackhawk
Gold, however, Muroff titled it in the name of an entity owned by his associate, so that the two
could complete the development and sell it at a profit for themselves.  Muroff also concealed his
involvement in the deal from the sellers of the development, who knew Muroff was seeking EB-
5 investors.
19. Even though he acquired the real estate development for himself and his associate
using investor funds, Muroff submitted a purchase agreement to investors and USCIS stating that
Blackhawk Gold purchased the real estate development for $28 million from his former business
partners.  This agreement was false and misleading because Muroff purchased the real estate
development for himself and his associate (rather than for Blackhawk Gold) for $7.8 million
(rather than $28 million).  This was part of Muroff’s efforts to conceal his misappropriation of

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investor money from Blackhawk Gold.
20. Between 2011 and 2014, Muroff used millions of dollars in investor funds to
develop the property, but failed to disclose to investors and USCIS that title to the property was
held in the name of his associate’s company so he and his associate would receive the financial
benefit from completion of the development, not the EB-5 investors.  Muroff’s associate
continued to hold title to the property until 2014 when, after USCIS inquired about the property,
Muroff had his associate transfer title to an entity in which the EB-5 investors held an interest.
Accordingly, for a period of at least three years, the EB-5 investors did not hold title to the
property Muroff used their money to purchase.
21. Muroff also purported to “sell” his interests in gold mining projects to the EB-5
investors through the sale of his stake in a gold mining company.  However, the company in
which Muroff held an ownership stake did not own real mining assets, it held only non-binding
letters of intent and a business plan to invest in mining ventures.  Muroff misappropriated
investor funds to acquire the actual ownership interests in the projects and then “sold” the
interests back to the investors at a higher price to benefit himself.  Although the Blackhawk Gold
PPM disclosed that Muroff would sell his interest in the mining company to the Fund, Muroff
never disclosed to investors that he would use their money to purchase assets for his company,
which he would then sell back to the investors for a profit.
22. Muroff also improperly used investor funds (which he funneled through Equity
Recap) to pay $5.6 million to the company that solicited investors in China.  This allowed him to
continue raising more money to perpetuate his scheme.  According to USCIS’s May 30, 2013
Policy Memorandum on EB-5 Adjudications, “the full amount of the immigrant’s investment
must be made available to the business(es) most closely responsible for creating the jobs upon

 8
which EB-5 eligibility is based.”  The payment of commissions to foreign finders using investor
capital contributions is inconsistent with the purposes of the EB-5 Program because such
commissions do not contribute to job creation in the United States.  Muroff was aware that
capital from investors was required to be spent on the job-creating enterprise, and he transferred
investor money to Equity Recap before paying it to the foreign finder because he knew he was
not allowed to pay finders directly from investor capital contributions.
B. MUROFF’S MISAPPROPRIATION AND MISUSE OF INVESTOR
FUNDS FROM QUARTZBURG GOLD
23. From 2012 to 2013, Muroff and ISR Capital raised $78 million from 156
investors, primarily from China, through Quartzburg Gold.  According to the Quartzburg Gold
PPM which was provided to investors, investment proceeds would be used to finance mining
projects in Idaho and Montana.
24. The Quartzburg Gold PPM stated that ISR Capital was the general partner of
Quartzburg Gold, that Muroff and another individual were the principals of ISR Capital, and that
ISR Capital was responsible for “managing all of the investments to be made by the Partnership,
including making decisions in relation to the acquisition, financing, structuring, monitoring and
disposition of the investments.”  ISR Capital and Muroff advised Quartzburg Gold on its
investments, which included membership, limited partnership, or equity interests in companies
engaged in mining projects, and they were entitled to compensation for these services.
25. Muroff and ISR Capital did use a significant portion of the Quartzburg Gold
offering proceeds to invest in companies engaged in mining projects and to fund early-stage
mining operations, but none of the operations generated any revenues.  As he had with
Blackhawk Gold, Muroff also misappropriated some of the investor money from Quartzburg
Gold to acquire ownership interests in the mining projects for himself and then “sold” the

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interests back to the investors at a higher price through Equity Recap.
26. Muroff and ISR Capital also transferred $20 million from Quartzburg Gold to a
third-party investment adviser, which invested the funds in a risky options trading strategy.  This
was contrary to Quartzburg Gold’s PPM and limited partnership agreement, which required that
cash assets that were not immediately used for the job-creating enterprise be invested in “short-
term investments,” generally defined as cash, cash equivalents, commercial paper, U.S.
government obligations, money market instruments, certificates of deposit, or pooled investment
vehicles that invest in similar instruments.
27. Muroff and ISR Capital caused Quartzburg Gold to pay the investment adviser
almost $400,000 in fees over an 18-month period, while Muroff continued to solicit additional
investor funds.  Ultimately, the options trading strategy resulted in market losses of
approximately $640,000 to Quartzburg Gold.  Neither Muroff nor ISR Capital disclosed to
Quartzburg Gold investors or USCIS the options investments, the fees paid to the investment
adviser, or the fact that the trades netted losses of $640,000.
C. MUROFF USED EQUITY RECAP TO MISAPPROPRIATE $5 MILLION
FOR HIS PERSONAL BENEFIT

28. Muroff attempted to conceal his misappropriation from both Funds by directing
Riddle to first transfer investor money to Equity Recap.  From Equity Recap, he then used
investor money to purchase assets he purportedly already had and then “sold” back to the
investors through his companies, including the McCall, Idaho real estate project and mining
projects for Blackhawk Gold and Quartzburg Gold.  He then used any “excess” money (the
investor money he transferred to Equity Recap that exceeded the amount he needed to actually
buy the assets he claimed he already owned, but did not) for whatever he wanted—claiming
these were his “profits.”

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29. All told, Muroff used approximately $5 million of investor funds he diverted from
Blackhawk Gold and Quartzburg Gold to Equity Recap to enrich himself and to benefit his own
personal business ventures.  For example, he used $1.1 million to purchase two personal
residential properties, $423,000 to invest in a zip line operation in Washington state, $47,000 to
purchase a Range Rover, $40,000 to purchase a BMW, and $97,000 for personal living expenses.
D. RIDDLE’S ROLE IN THE SCHEME
30. Riddle was the main conduit between representatives for the investors and
Blackhawk Gold and Quartzburg Gold, transmitting offering documents to investors’
representatives and receiving investors’ USCIS filings.  Riddle had signatory authority on the
Equity Recap and Fund bank accounts, and she transferred money and paid expenses at Muroff’s
direction, including for his personal benefit.  She transferred millions of dollars of investor funds
from Blackhawk Gold and Quartzburg Gold to Equity Recap, some of which she used to acquire
the assets that Muroff purportedly already had and then “sold” back to the investors through his
companies, such as the McCall, Idaho real estate development.  Riddle also transferred the $20
million from Quartzburg Gold that Muroff and ISR Capital invested in the options trading
strategy.
31. Riddle facilitated Muroff’s use of millions of dollars of investor funds through
Equity Recap to purchase his residences and for other personal purposes, to make improper
commission payments to the foreign finder, and to pay herself approximately $500,000 in bonus
compensation over a three-year period.  Riddle was aware that the commission payments were
improper because Muroff instructed her to open a separate bank account for Equity Recap
through which commission payments could be funneled to avoid detection.
32. Muroff told Riddle that the money he instructed her to transfer from Blackhawk
Gold and Quartzburg Gold to Equity Recap belonged to him because he had sold interests in his

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companies to the EB-5 investors.  But Riddle was involved in the transfers of investor money to
purchase the underlying assets involved in the real estate development and in the mining
ventures, and therefore knew or should have known that Muroff did not already own the interests
and could not have sold them to the investors for a profit.
FIRST CLAIM FOR RELIEF
(Violations of Section 10(b) of the Exchange Act and Rule 10b-5 by
Muroff, Blackhawk Manager, ISR Capital and Equity Recap)
(Securities Fraud)

33. Paragraph numbers 1 through 32 are re-alleged and incorporated herein by
reference.
34. Defendants Muroff, Blackhawk Manager, ISR Capital and Equity Recap, by
engaging in the conduct set forth above, directly or indirectly, by use of means or
instrumentalities of interstate commerce, or of the mails, or of a facility of a national security
exchange, with scienter, employed devices, schemes, or artifices to defraud and engaged in acts,
practices, or courses of business which operated or would operate as a fraud or deceit upon other
persons, in connection with the purchase or sale of securities, in violation of Section 10(b) of the
Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-
5(a) and (c)], and unless restrained and enjoined will continue to violate these provisions.
SECOND CLAIM FOR RELIEF
(Violations of Sections 17(a)(1) and 17(a)(3) of the Securities Act by
Muroff, Blackhawk Manager, ISR Capital and Equity Recap)
(Securities Fraud)

35. Paragraph numbers 1 through 34 are re-alleged and incorporated herein by
reference.
36. Defendants Muroff, Blackhawk Manager, ISR Capital and Equity Recap, have, by
engaging in the conduct set forth above, directly or indirectly, in the offer or sale of securities, by

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the use of means or instruments of transportation or communication in interstate commerce, or of
the mails:  (1) with scienter, employed devices, schemes, or artifices to defraud; (2) obtained
money or property by means of untrue statements of material fact or by omitting to state material
facts necessary in order to make statements made, in the light of the circumstances under which
they were made, not misleading; and (3) engaged in transactions, practices, or courses of
business which operated or would operate as a fraud or deceit upon the purchasers of such
securities.
37. By reason of the foregoing, Defendants Muroff, Blackhawk Manager, ISR Capital
and Equity Recap have directly or indirectly violated Sections 17(a)(1) and 17(a)(3) of the
Securities Act [15 U.S.C. § 77q(a)(1) and (3)], and unless restrained and enjoined will continue
to violate these provisions.
THIRD CLAIM FOR RELIEF
(Violations of Section 17(a)(3) of the Securities Act by Riddle)
(Securities Fraud)

38. Paragraph numbers 1 through 37 are re-alleged and incorporated herein by
reference.
39. Defendant Riddle has, by engaging in the conduct set forth above, directly or
indirectly, in the offer or sale of securities, by the use of means or instruments of transportation
or communication in interstate commerce, or of the mails, engaged in transactions, practices, or
courses of business which operated or would operate as a fraud or deceit upon the purchasers of
such securities.
40. By reason of the foregoing, Defendant Riddle has directly or indirectly violated
Section 17(a)(3) of the Securities Act [15 U.S.C. § 77q(a)(3)], and unless restrained and enjoined
will continue to violate this provision.

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FOURTH CLAIM FOR RELIEF
(Violations of Sections 206(1) and 206(2) of the Advisers Act by
Muroff, Blackhawk Manager and ISR Capital)
(Investment Adviser Fraud)

41. Paragraph numbers 1 through 40 are re-alleged and incorporated herein by
reference.
42. At all relevant times, Defendants Muroff, Blackhawk Manager and ISR Capital
were “investment advisers” within the meaning of Section 202(a)(11) of the Advisers Act [15
U.S.C. § 80b-2(a)(11)].  Defendants Muroff, Blackhawk Manager and ISR Capital each were in
the business of providing investment advice concerning securities for compensation.
43. As set forth above, Defendants Muroff, Blackhawk Manager and ISR Capital
defrauded their clients, the Funds, by misappropriating money from them and engaging in self-
dealing through a scheme to defraud and through transactions, practices, and courses of business
which operated as a fraud or deceit upon the Funds.
44. Defendants Muroff, Blackhawk Manager and ISR Capital, by use of the mails or
any means or instrumentality of interstate commerce, directly or indirectly, acting intentionally,
knowingly or recklessly: (a) have employed or are employing devices, schemes, or artifices to
defraud clients and/or potential clients; or (b) have engaged or are engaging in transactions,
practices, or courses of business which operate as a fraud or deceit upon a client or prospective
client.
45. As a result, Defendants Muroff, Blackhawk Manager and ISR Capital have
violated Sections 206(1) and (2) of the Advisers Act [15 U.S.C. § 80b-6(1) and (2)], and unless
restrained and enjoined will continue to violate these provisions.

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FIFTH CLAIM FOR RELIEF
(Violations of Section 206(4) of the Advisers Act and Rule 206(4)-8 by
Muroff, Blackhawk Manager and ISR Capital)
(Investment Adviser Fraud)

46. Paragraph numbers 1 through 45 are re-alleged and incorporated herein by
reference.
47. At all times relevant to this Complaint, Defendants Muroff, Blackhawk Manager
and ISR Capital acted as investment advisers to Blackhawk Gold and Quartzburg Gold, pooled
investment vehicles as defined in Rule 206(4)-8(b) [17 C.F.R. § 275.206(4)-8(b)].
48. Defendants Muroff, Blackhawk Manager and ISR Capital, while acting as
investment advisers to pooled investment vehicles, by use of the mails, and the means and
instrumentalities of interstate commerce, directly or indirectly, engaged in acts, practices, or
courses of businesses which were fraudulent, deceptive or manipulative.  Defendants Muroff,
Blackhawk Manager and ISR Capital engaged in acts, practices, or courses of businesses that
were fraudulent, deceptive or manipulative with respect to investors or prospective investors in
the pooled investment vehicles.
49. By engaging in the conduct described above, Defendants Muroff, Blackhawk
Manager and ISR Capital have 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], and unless restrained and
enjoined will continue to violate these provisions.
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that this Court enter a judgment:
I.
Permanently enjoining Defendants Muroff, Blackhawk Manager, ISR Capital, and Equity
Recap from directly or indirectly violating Section 17(a) of the Securities Act [15 U.S.C. §

 15
77q(a)], and 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],  and permanently enjoining Defendant Riddle from directly or indirectly
violating Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].
II.
Permanently enjoining Defendants Muroff, Blackhawk Manager and ISR Capital from
directly or indirectly violating 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.
Permanently barring Defendant Muroff from serving as an officer or director of a public
company pursuant to Section 20(e) of the Securities Act [ 15 § U.S.C. 77t(e)] and Section
21(d)(2) of the Exchange Act [ 15 U.S.C. § 78u(d)(2)].
IV.
Permanently enjoining Defendant Muroff from directly or indirectly, including, but not
limited to, through any entity owned or controlled by him: (a) participating in the issuance,
purchase, offer, or sale of any security issued through the EB-5 Immigrant Investor Program
(provided however that such injunction shall not prevent Muroff from purchasing or selling
securities for his own personal account); and (b) participating in the management, administration,
or supervision of, or otherwise exercising any control over, any commercial enterprise or project
that has issued or is issuing any securities through the EB-5 Immigrant Investor Program, except
for work undertaken by Muroff with the express consent of the Independent Manager and under
the oversight of the Independent Monitor appointed pursuant to the undertakings set forth in the
Consent of Defendants Muroff, Blackhawk Manager, ISR Capital and Equity Recap, filed
concurrently herewith.

 16
V.
Ordering Defendants to disgorge their ill-gotten gains from the conduct alleged herein,
plus prejudgment interest thereon.
VI.
Imposing civil penalties against Defendants pursuant to Section 20(d) of the Securities
Act [15 U.S.C. § 77t(d)] and Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)].
VII.
Ordering Defendants Muroff, Blackhawk Manager and ISR Capital to comply with the
undertakings set forth in the Consent of Defendants Muroff, Blackhawk Manager, ISR Capital
and Equity Recap, filed concurrently herewith.
VIII.
Retaining 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.
IX.
Granting such other and further relief as this Court may determine to be just, equitable,
and necessary.

Dated:  April 28, 2017   Respectfully submitted,

      s/ Steven D. Buchholz
      STEVEN D . BUCHHOLZ
Attorney for Plaintiff
SECURITIES AND EXCHANGE
COMMISSION

1 

JINA CHOI (NY Bar No. 2699718) 
ERIN E. SCHNEIDER (Cal. Bar No. 216114) 
STEVEN D. BUCHHOLZ (Cal. Bar No. 202638) 
   [email protected] 
ALICE L. JENSEN (Cal. Bar No. 203327) 
   [email protected] 
WADE M. RHYNE (Cal. Bar No. 216799) 
   [email protected] 
 
Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
44 Montgomery Street, Suite 2800 
San Francisco, California  94104  
Telephone:  (415) 705-2500 
Facsimile:  (415) 705-2501 

 
UNITED STATES DISTRICT COURT 

 
DISTRICT OF IDAHO 

 
  
SECURITIES AND EXCHANGE COMMISSION,  
  

Plaintiff,  
 C.A. No. __-____ (ABC) 

v.  
  
SEROFIM MUROFF, BLACKHAWK 
MANAGER, LLC, ISR CAPITAL, LLC, 
EQUITY RECAP ACCOUNT, LLC and 
DEBRA L. RIDDLE, 
 

Defendants. 

COMPLAINT 

  
  
  
 
 

Plaintiff Securities and Exchange Commission (“Commission” or “SEC”) alleges: 

SUMMARY OF ACTION 

1. Beginning in or about May 2010 and continuing through 2013, defendants 

Serofim Muroff (“Muroff”) and his affiliated entities Blackhawk Manager, LLC (“Blackhawk 

Manager”) and ISR Capital, LLC (“ISR Capital”) raised approximately $140.5 million from over 

Case 1:17-cv-00180-CWD   Document 1   Filed 04/28/17   Page 1 of 16



 
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280 foreign investors through the sale of securities in Blackhawk Gold, LLC and Quartzburg 

Gold, LP (the “Funds”).  Both offerings were sponsored by Muroff’s Idaho State Regional 

Center pursuant to the EB-5 Program, which is administered by the United States Citizenship 

and Immigration Services (“USCIS”) and provides an opportunity for foreign nationals to 

petition for United States residency if they make a qualified investment in a specified project that 

is determined to have created or preserved at least ten jobs for United States workers.    

2. Although he invested some of the money raised through the Funds for the 

purposes described in the offering materials—a real estate development and gold mining 

ventures—Muroff, through Blackhawk Manager and ISR Capital, misappropriated and misused 

investor funds from both offerings.  Muroff used a total of approximately $5 million for personal 

purposes, including $1.1 million to purchase two residential properties, $423,000 to invest in a 

zip line operation in Washington state, $47,000 to purchase a Range Rover, $40,000 to purchase 

a BMW, and $97,000 for personal living expenses.  He engaged in a series of acts designed to 

hide his misappropriation from both investors and USCIS, including secretly using investor 

funds to purchase the real estate and mining assets for himself and then “selling” them back to 

investors at an inflated price so he could pocket the profit.     

3. Muroff also improperly diverted $20 million of investor money to invest in an 

options trading strategy which resulted in the loss of more than $1 million through market losses 

and adviser fees, none of which was disclosed to investors.  And, Muroff misused $5.6 million in 

investor funds to pay commissions to a company in Taiwan that solicited investors in China.  

These payments were improper and undermined the job-creating purposes of the EB-5 Program 

because the commissions did not contribute to job creation in the United States. 

4. Defendant Debra Louise Riddle (“Riddle”) held the title of Chief Financial 

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Officer of ISR Capital, but in essence worked as a bookkeeper and administrative assistant for 

Muroff.  From 2010 to 2014, she facilitated Muroff’s fraudulent scheme and misappropriation 

by, among other things, funneling investor money from the Funds to Muroff’s wholly-owned 

company, Equity Recap Account, LLC (“Equity Recap”), and then to Muroff for personal 

purposes and to the company that solicited investors in China. 

5. Defendants Muroff, Blackhawk Manager, ISR Capital and Equity Recap violated 

the antifraud provisions of Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 

U.S.C. § 77q(a)] and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 

U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5] by engaging in a fraudulent 

scheme, and defendant Riddle violated the antifraud provisions of Section 17(a)(3) of the 

Securities Act [15 U.S.C. § 77q(a)(3)], while offering and selling interests in the Funds.   

6. By virtue of their management of Blackhawk Gold and Quartzburg Gold, 

defendants Muroff, Blackhawk Manager and ISR Capital are investment advisers and violated 

Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 (“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] by making material misrepresentations, engaging in a fraudulent scheme, and 

breaching their fiduciary duties to the Funds and their investors.   

JURISDICTION AND VENUE 

7. The Commission brings this action pursuant to Sections 20(b), 20(d) and 22(a) of 

the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t(b), 77t(d) and 77v(a)]; Sections 

21(d), 21(e) and 27 of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 

78u(d), 78u(e) and 78aa]; and Sections 209(c), 209(d) and 209(e) of the Investment Advisers Act 

of 1940 (“Advisers Act”) [15 U.S.C. §§ 80b-9(c), 80b-9(d) and 80b-9(e)]. 

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8. Defendants, directly or indirectly, made use of the means and instrumentalities of 

interstate commerce or of the mails in connection with the acts, transactions, practices, and 

courses of business alleged in this Complaint. 

9. Venue is proper in this District pursuant to Section 22(a) of the Securities Act [15 

U.S.C. § 77v(a)], Section 27(a) of the Exchange Act [15 U.S.C. § 78aa(a)], and Section 214 of 

the Advisers Act [15 U.S.C. § 80b-14].  During the period described in this Complaint, 

defendants Blackhawk Manager, ISR Capital, and Equity Recap have maintained their principal 

places of business in Idaho.  Defendants Muroff and Riddle also reside in this District.  In 

addition, acts, practices, transactions, and courses of business that form the basis for the 

violations alleged in this Complaint occurred in this District. 

DEFENDANTS 

10. Defendant Serofim Muroff, age 40 of Boise, Idaho, is the Chief Executive Officer 

of Blackhawk Manager and the Idaho State Regional Center, as well as the principal of ISR 

Capital and Equity Recap.   

11. Defendant Debra Louise Riddle, age 56 of Boise, Idaho, held the title of Chief 

Financial Officer of ISR Capital and worked as a bookkeeper and administrative assistant for 

Muroff, ISR Capital, Blackhawk Manager, and Equity Recap from 2010 to 2014.   

12. Defendant Blackhawk Manager, LLC is an Idaho limited liability company 

organized in 2009 with its principal place of business in Boise, Idaho.  Blackhawk Manager is 

owned and controlled by Muroff.  Blackhawk Manager is the managing member and serves as 

investment adviser to Blackhawk Gold, selecting and overseeing investments in a residential and 

recreational real estate development in McCall, Idaho and gold mining companies in Idaho. 

13. Defendant ISR Capital, LLC is an Idaho limited liability company organized in 

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2009 with its principal place of business in Boise, Idaho.  ISR Capital is controlled and part-

owned by Muroff and serves as investment adviser to Quartzburg Gold, selecting and overseeing 

investments in mining-related companies in Idaho and Montana.   

14. Defendant Equity Recap Account, LLC is an Idaho limited liability company 

formed in 2011 with its principal place of business in Boise, Idaho.  Equity Recap is owned and 

controlled by Muroff and he used Equity Recap to misappropriate investor funds from 

Blackhawk Gold and Quartzburg Gold for personal purposes.   

FACTUAL ALLEGATIONS 

A. MUROFF’S MISAPPROPRIATION AND MISUSE OF INVESTOR 
FUNDS FROM BLACKHAWK GOLD 

15. From 2010 to 2012, Muroff and Blackhawk Manager raised $62.5 million from 

129 foreign investors, primarily from China, through Blackhawk Gold.  According to the 

Blackhawk Gold private placement memorandum (“PPM”) given to investors, as much as $20 

million from the offering would be used to acquire and complete a McCall, Idaho real estate 

development project from companies affiliated with Muroff.  The Blackhawk Gold PPM further 

stated that as much as $40 million from the offering would be used to acquire interests in 

companies affiliated with Muroff that engaged in gold mining ventures in Idaho. 

16. The PPM and operating agreement for Blackhawk Gold, which were provided to 

investors and incorporated in their immigration petitions filed with USCIS, provided that 

Blackhawk Manager was the Managing Member of Blackhawk Gold, that Muroff was the 

manager of Blackhawk Manager, and that Blackhawk Manager “shall be responsible for, and 

have complete authority and discretion in, the management of the Company’s business” and 

“shall follow the investment guidelines set forth in the PPM in connection with acquisition and 

disposition of Properties.”  Blackhawk Manager and Muroff advised Blackhawk Gold on its 

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investments in mining companies, which consisted of membership, limited partnership, or equity 

interests, and they were entitled to compensation for these services. 

17. While Muroff held interests in companies affiliated with the real estate 

development and gold mining projects, his companies did not own the primary assets underlying 

the projects.  As part of his scheme, Muroff misappropriated millions of dollars of investor 

money to acquire the assets for his own companies and then “sold” the interests he acquired back 

to the investors at a higher price.  Although the Blackhawk Gold PPM disclosed that Muroff 

would sell his interest in the real estate development to the Fund, Muroff never disclosed to 

investors that he would use their money to purchase assets for his company first and then sell 

them back to the investors. 

18. For example, Muroff used $7.8 million of investor funds taken from Blackhawk 

Gold (which he funneled through Equity Recap to his business associate) to acquire a real estate 

development in McCall, Idaho.  Rather than title the development in the name of Blackhawk 

Gold, however, Muroff titled it in the name of an entity owned by his associate, so that the two 

could complete the development and sell it at a profit for themselves.  Muroff also concealed his 

involvement in the deal from the sellers of the development, who knew Muroff was seeking EB-

5 investors. 

19. Even though he acquired the real estate development for himself and his associate 

using investor funds, Muroff submitted a purchase agreement to investors and USCIS stating that 

Blackhawk Gold purchased the real estate development for $28 million from his former business 

partners.  This agreement was false and misleading because Muroff purchased the real estate 

development for himself and his associate (rather than for Blackhawk Gold) for $7.8 million 

(rather than $28 million).  This was part of Muroff’s efforts to conceal his misappropriation of 

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investor money from Blackhawk Gold.   

20. Between 2011 and 2014, Muroff used millions of dollars in investor funds to 

develop the property, but failed to disclose to investors and USCIS that title to the property was 

held in the name of his associate’s company so he and his associate would receive the financial 

benefit from completion of the development, not the EB-5 investors.  Muroff’s associate 

continued to hold title to the property until 2014 when, after USCIS inquired about the property, 

Muroff had his associate transfer title to an entity in which the EB-5 investors held an interest.  

Accordingly, for a period of at least three years, the EB-5 investors did not hold title to the 

property Muroff used their money to purchase. 

21. Muroff also purported to “sell” his interests in gold mining projects to the EB-5 

investors through the sale of his stake in a gold mining company.  However, the company in 

which Muroff held an ownership stake did not own real mining assets, it held only non-binding 

letters of intent and a business plan to invest in mining ventures.  Muroff misappropriated 

investor funds to acquire the actual ownership interests in the projects and then “sold” the 

interests back to the investors at a higher price to benefit himself.  Although the Blackhawk Gold 

PPM disclosed that Muroff would sell his interest in the mining company to the Fund, Muroff 

never disclosed to investors that he would use their money to purchase assets for his company, 

which he would then sell back to the investors for a profit. 

22. Muroff also improperly used investor funds (which he funneled through Equity 

Recap) to pay $5.6 million to the company that solicited investors in China.  This allowed him to 

continue raising more money to perpetuate his scheme.  According to USCIS’s May 30, 2013 

Policy Memorandum on EB-5 Adjudications, “the full amount of the immigrant’s investment 

must be made available to the business(es) most closely responsible for creating the jobs upon 

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which EB-5 eligibility is based.”  The payment of commissions to foreign finders using investor 

capital contributions is inconsistent with the purposes of the EB-5 Program because such 

commissions do not contribute to job creation in the United States.  Muroff was aware that 

capital from investors was required to be spent on the job-creating enterprise, and he transferred 

investor money to Equity Recap before paying it to the foreign finder because he knew he was 

not allowed to pay finders directly from investor capital contributions. 

B. MUROFF’S MISAPPROPRIATION AND MISUSE OF INVESTOR 
FUNDS FROM QUARTZBURG GOLD 

23. From 2012 to 2013, Muroff and ISR Capital raised $78 million from 156 

investors, primarily from China, through Quartzburg Gold.  According to the Quartzburg Gold 

PPM which was provided to investors, investment proceeds would be used to finance mining 

projects in Idaho and Montana. 

24. The Quartzburg Gold PPM stated that ISR Capital was the general partner of 

Quartzburg Gold, that Muroff and another individual were the principals of ISR Capital, and that 

ISR Capital was responsible for “managing all of the investments to be made by the Partnership, 

including making decisions in relation to the acquisition, financing, structuring, monitoring and 

disposition of the investments.”  ISR Capital and Muroff advised Quartzburg Gold on its 

investments, which included membership, limited partnership, or equity interests in companies 

engaged in mining projects, and they were entitled to compensation for these services. 

25. Muroff and ISR Capital did use a significant portion of the Quartzburg Gold 

offering proceeds to invest in companies engaged in mining projects and to fund early-stage 

mining operations, but none of the operations generated any revenues.  As he had with 

Blackhawk Gold, Muroff also misappropriated some of the investor money from Quartzburg 

Gold to acquire ownership interests in the mining projects for himself and then “sold” the 

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interests back to the investors at a higher price through Equity Recap. 

26. Muroff and ISR Capital also transferred $20 million from Quartzburg Gold to a 

third-party investment adviser, which invested the funds in a risky options trading strategy.  This 

was contrary to Quartzburg Gold’s PPM and limited partnership agreement, which required that 

cash assets that were not immediately used for the job-creating enterprise be invested in “short-

term investments,” generally defined as cash, cash equivalents, commercial paper, U.S. 

government obligations, money market instruments, certificates of deposit, or pooled investment 

vehicles that invest in similar instruments.   

27. Muroff and ISR Capital caused Quartzburg Gold to pay the investment adviser 

almost $400,000 in fees over an 18-month period, while Muroff continued to solicit additional 

investor funds.  Ultimately, the options trading strategy resulted in market losses of 

approximately $640,000 to Quartzburg Gold.  Neither Muroff nor ISR Capital disclosed to 

Quartzburg Gold investors or USCIS the options investments, the fees paid to the investment 

adviser, or the fact that the trades netted losses of $640,000. 

C. MUROFF USED EQUITY RECAP TO MISAPPROPRIATE $5 MILLION 
FOR HIS PERSONAL BENEFIT 

 
28. Muroff attempted to conceal his misappropriation from both Funds by directing 

Riddle to first transfer investor money to Equity Recap.  From Equity Recap, he then used 

investor money to purchase assets he purportedly already had and then “sold” back to the 

investors through his companies, including the McCall, Idaho real estate project and mining 

projects for Blackhawk Gold and Quartzburg Gold.  He then used any “excess” money (the 

investor money he transferred to Equity Recap that exceeded the amount he needed to actually 

buy the assets he claimed he already owned, but did not) for whatever he wanted—claiming 

these were his “profits.”     

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29. All told, Muroff used approximately $5 million of investor funds he diverted from 

Blackhawk Gold and Quartzburg Gold to Equity Recap to enrich himself and to benefit his own 

personal business ventures.  For example, he used $1.1 million to purchase two personal 

residential properties, $423,000 to invest in a zip line operation in Washington state, $47,000 to 

purchase a Range Rover, $40,000 to purchase a BMW, and $97,000 for personal living expenses. 

D. RIDDLE’S ROLE IN THE SCHEME 

30. Riddle was the main conduit between representatives for the investors and 

Blackhawk Gold and Quartzburg Gold, transmitting offering documents to investors’ 

representatives and receiving investors’ USCIS filings.  Riddle had signatory authority on the 

Equity Recap and Fund bank accounts, and she transferred money and paid expenses at Muroff’s 

direction, including for his personal benefit.  She transferred millions of dollars of investor funds 

from Blackhawk Gold and Quartzburg Gold to Equity Recap, some of which she used to acquire 

the assets that Muroff purportedly already had and then “sold” back to the investors through his 

companies, such as the McCall, Idaho real estate development.  Riddle also transferred the $20 

million from Quartzburg Gold that Muroff and ISR Capital invested in the options trading 

strategy. 

31. Riddle facilitated Muroff’s use of millions of dollars of investor funds through 

Equity Recap to purchase his residences and for other personal purposes, to make improper 

commission payments to the foreign finder, and to pay herself approximately $500,000 in bonus 

compensation over a three-year period.  Riddle was aware that the commission payments were 

improper because Muroff instructed her to open a separate bank account for Equity Recap 

through which commission payments could be funneled to avoid detection. 

32. Muroff told Riddle that the money he instructed her to transfer from Blackhawk 

Gold and Quartzburg Gold to Equity Recap belonged to him because he had sold interests in his 

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companies to the EB-5 investors.  But Riddle was involved in the transfers of investor money to 

purchase the underlying assets involved in the real estate development and in the mining 

ventures, and therefore knew or should have known that Muroff did not already own the interests 

and could not have sold them to the investors for a profit.   

FIRST CLAIM FOR RELIEF 

(Violations of Section 10(b) of the Exchange Act and Rule 10b-5 by 
Muroff, Blackhawk Manager, ISR Capital and Equity Recap) 

(Securities Fraud) 
 

33. Paragraph numbers 1 through 32 are re-alleged and incorporated herein by 

reference. 

34. Defendants Muroff, Blackhawk Manager, ISR Capital and Equity Recap, by 

engaging in the conduct set forth above, directly or indirectly, by use of means or 

instrumentalities of interstate commerce, or of the mails, or of a facility of a national security 

exchange, with scienter, employed devices, schemes, or artifices to defraud and engaged in acts, 

practices, or courses of business which operated or would operate as a fraud or deceit upon other 

persons, in connection with the purchase or sale of securities, in violation of Section 10(b) of the 

Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-

5(a) and (c)], and unless restrained and enjoined will continue to violate these provisions. 

SECOND CLAIM FOR RELIEF 

(Violations of Sections 17(a)(1) and 17(a)(3) of the Securities Act by 
Muroff, Blackhawk Manager, ISR Capital and Equity Recap) 

(Securities Fraud) 
 

35. Paragraph numbers 1 through 34 are re-alleged and incorporated herein by 

reference. 

36. Defendants Muroff, Blackhawk Manager, ISR Capital and Equity Recap, have, by 

engaging in the conduct set forth above, directly or indirectly, in the offer or sale of securities, by 

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the use of means or instruments of transportation or communication in interstate commerce, or of 

the mails:  (1) with scienter, employed devices, schemes, or artifices to defraud; (2) obtained 

money or property by means of untrue statements of material fact or by omitting to state material 

facts necessary in order to make statements made, in the light of the circumstances under which 

they were made, not misleading; and (3) engaged in transactions, practices, or courses of 

business which operated or would operate as a fraud or deceit upon the purchasers of such 

securities. 

37. By reason of the foregoing, Defendants Muroff, Blackhawk Manager, ISR Capital 

and Equity Recap have directly or indirectly violated Sections 17(a)(1) and 17(a)(3) of the 

Securities Act [15 U.S.C. § 77q(a)(1) and (3)], and unless restrained and enjoined will continue 

to violate these provisions. 

THIRD CLAIM FOR RELIEF 

(Violations of Section 17(a)(3) of the Securities Act by Riddle) 
(Securities Fraud) 

 
38. Paragraph numbers 1 through 37 are re-alleged and incorporated herein by 

reference. 

39. Defendant Riddle has, by engaging in the conduct set forth above, directly or 

indirectly, in the offer or sale of securities, by the use of means or instruments of transportation 

or communication in interstate commerce, or of the mails, engaged in transactions, practices, or 

courses of business which operated or would operate as a fraud or deceit upon the purchasers of 

such securities. 

40. By reason of the foregoing, Defendant Riddle has directly or indirectly violated 

Section 17(a)(3) of the Securities Act [15 U.S.C. § 77q(a)(3)], and unless restrained and enjoined 

will continue to violate this provision. 

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FOURTH CLAIM FOR RELIEF 

(Violations of Sections 206(1) and 206(2) of the Advisers Act by 
Muroff, Blackhawk Manager and ISR Capital) 

(Investment Adviser Fraud) 
 

41. Paragraph numbers 1 through 40 are re-alleged and incorporated herein by 

reference. 

42. At all relevant times, Defendants Muroff, Blackhawk Manager and ISR Capital 

were “investment advisers” within the meaning of Section 202(a)(11) of the Advisers Act [15 

U.S.C. § 80b-2(a)(11)].  Defendants Muroff, Blackhawk Manager and ISR Capital each were in 

the business of providing investment advice concerning securities for compensation.   

43. As set forth above, Defendants Muroff, Blackhawk Manager and ISR Capital 

defrauded their clients, the Funds, by misappropriating money from them and engaging in self-

dealing through a scheme to defraud and through transactions, practices, and courses of business 

which operated as a fraud or deceit upon the Funds. 

44. Defendants Muroff, Blackhawk Manager and ISR Capital, by use of the mails or 

any means or instrumentality of interstate commerce, directly or indirectly, acting intentionally, 

knowingly or recklessly: (a) have employed or are employing devices, schemes, or artifices to 

defraud clients and/or potential clients; or (b) have engaged or are engaging in transactions, 

practices, or courses of business which operate as a fraud or deceit upon a client or prospective 

client. 

45. As a result, Defendants Muroff, Blackhawk Manager and ISR Capital have 

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

restrained and enjoined will continue to violate these provisions. 

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FIFTH CLAIM FOR RELIEF 

(Violations of Section 206(4) of the Advisers Act and Rule 206(4)-8 by 
Muroff, Blackhawk Manager and ISR Capital) 

(Investment Adviser Fraud) 
 

46. Paragraph numbers 1 through 45 are re-alleged and incorporated herein by 

reference. 

47. At all times relevant to this Complaint, Defendants Muroff, Blackhawk Manager 

and ISR Capital acted as investment advisers to Blackhawk Gold and Quartzburg Gold, pooled 

investment vehicles as defined in Rule 206(4)-8(b) [17 C.F.R. § 275.206(4)-8(b)]. 

48. Defendants Muroff, Blackhawk Manager and ISR Capital, while acting as 

investment advisers to pooled investment vehicles, by use of the mails, and the means and 

instrumentalities of interstate commerce, directly or indirectly, engaged in acts, practices, or 

courses of businesses which were fraudulent, deceptive or manipulative.  Defendants Muroff, 

Blackhawk Manager and ISR Capital engaged in acts, practices, or courses of businesses that 

were fraudulent, deceptive or manipulative with respect to investors or prospective investors in 

the pooled investment vehicles. 

49. By engaging in the conduct described above, Defendants Muroff, Blackhawk 

Manager and ISR Capital have 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], and unless restrained and 

enjoined will continue to violate these provisions. 

PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that this Court enter a judgment: 

I. 

Permanently enjoining Defendants Muroff, Blackhawk Manager, ISR Capital, and Equity 

Recap from directly or indirectly violating Section 17(a) of the Securities Act [15 U.S.C. § 

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77q(a)], and 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], and permanently enjoining Defendant Riddle from directly or indirectly 

violating Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]. 

II. 

Permanently enjoining Defendants Muroff, Blackhawk Manager and ISR Capital from 

directly or indirectly violating 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. 

Permanently barring Defendant Muroff from serving as an officer or director of a public 

company pursuant to Section 20(e) of the Securities Act [15 § U.S.C. 77t(e)] and Section 

21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)]. 

IV. 

Permanently enjoining Defendant Muroff from directly or indirectly, including, but not 

limited to, through any entity owned or controlled by him: (a) participating in the issuance, 

purchase, offer, or sale of any security issued through the EB-5 Immigrant Investor Program 

(provided however that such injunction shall not prevent Muroff from purchasing or selling 

securities for his own personal account); and (b) participating in the management, administration, 

or supervision of, or otherwise exercising any control over, any commercial enterprise or project 

that has issued or is issuing any securities through the EB-5 Immigrant Investor Program, except 

for work undertaken by Muroff with the express consent of the Independent Manager and under 

the oversight of the Independent Monitor appointed pursuant to the undertakings set forth in the 

Consent of Defendants Muroff, Blackhawk Manager, ISR Capital and Equity Recap, filed 

concurrently herewith.  

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V. 

Ordering Defendants to disgorge their ill-gotten gains from the conduct alleged herein, 

plus prejudgment interest thereon. 

VI. 

Imposing civil penalties against Defendants pursuant to Section 20(d) of the Securities 

Act [15 U.S.C. § 77t(d)] and Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)]. 

VII. 

Ordering Defendants Muroff, Blackhawk Manager and ISR Capital to comply with the 

undertakings set forth in the Consent of Defendants Muroff, Blackhawk Manager, ISR Capital 

and Equity Recap, filed concurrently herewith. 

VIII. 

Retaining 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. 

IX. 

Granting such other and further relief as this Court may determine to be just, equitable, 

and necessary. 

 

Dated:  April 28, 2017   Respectfully submitted, 

 
      s/ Steven D. Buchholz      
      STEVEN D. BUCHHOLZ 

Attorney for Plaintiff 
SECURITIES AND EXCHANGE  
COMMISSION 

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