SEC v. Ronald A. Pallek, No. 2:25-cv-00364, Eastern District of Wisconsin (Mar. 11, 2025) — Complaint

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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF WISCONSIN

UNITED STATES SECURITIES AND
EXCHANGE COMMISSION,

Plaintiff,

v.

RONALD A. PALLEK,

Defendant.

              Case No:

              (Jury Demanded)

COMPLAINT

Plaintiff, U nited States Securities and Exchange Commission ( “SEC” or the “Commission”),
files this Complaint and alleges as follows:
NATURE OF THE ACTION
1. Defendant Ronald A. Pallek conducted a fraudulent securities offering by making
false promises to double investors’ money in only a year using an “Iron Condor” options trading
strategy.  By virtue of his lies, between February 2021 and September 2023, Pallek raised more
than $1.54 million from at least 87 investors.
2. Throughout the course of the scheme, Pallek misrepresented the risks of his options-
trading strategy, lied to investors about how he would use their funds, and falsely told investors he
had sufficient reserve funds to cover any potential losses.  Pallek also sent investors false account
statements purporting to show highly successful trading.
3. In reality, Pallek lost approximately $991,000 trading options and other securities.
Pallek also used some investor funds to make Ponzi-like payments to early investors.
4. In the fall of 2023, after some investors requested the return of their funds, Pallek
falsely told them the bank had frozen his accounts.  Pallek also showed investors fabricated

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documents he had created that purported to show both that his bank accounts had been frozen and
that they contained more than $1.25 million.
5. On March 10, 2025, Pallek was criminally charged by the filing of an Information in
this District, for conduct similar to that alleged herein. See United States v. Pallek, No. 25-CR-43.
6. Through his conduct, Pallek violated, and unless restrained will continue to violate,
Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)], 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], and Section 206(4) of the Investment Advisers Act of 1940 (“Advisers
Act”) [15 U.S.C. § 80b-6(4)] and Rule 206(4)-8 thereunder [17 C.F.R. § 275.206(4)-8].
7. To hold Pallek accountable, to return funds to his victims, and to prevent him from
harming future investors, the SEC seeks a permanent injunction prohibiting securities fraud,
disgorgement and prejudgment interest, and civil penalties.
JURISDICTION AND VENUE

8. The Commission brings this action to restrain Pallek from engaging in the
transactions, acts, practices and courses of business alleged in this Complaint, and transactions,
acts, practices and courses of business of similar purport and object, for disgorgement of illegally
obtained funds, civil money penalties, and other equitable relief.
9. This Court has jurisdiction over this action pursuant to Sections 20(b)-(d) and 22(a)
of the Securities Act [15 U.S.C. §§ 77t(b)-(d) and 77v(a)], Sections 21(d)-(e) and 27(a) of the
Exchange Act [15 U.S.C. §§ 78u(d)-(e) and 78aa], and Sections 209(d)-(e) and 214(a) of the
Advisers Act [15 U.S.C. §§ 80b-9(d)-(e) and 80b-14(a)].
10. Venue lies 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(a) of the Advisers
Act [15 U.S.C. § 80b-14(a)], because transactions, acts, practices and courses of business constituting

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violations of the federal securities laws occurred, and Defendant transacted business, within the Eastern
District of Wisconsin and elsewhere.
11. Defendant, directly and indirectly, made use of the means or instrumentalities of
interstate commerce, of the mails, or of the facilities of a national securities exchange in connection
with the transactions, acts, practices and courses of business alleged in this Complaint.
12. There is a reasonable likelihood that Defendant will, unless enjoined, continue to
engage in the transactions, acts, practices and courses of business set forth in this complaint, and
transactions, acts, practices and courses of business of similar purport and object.
DEFENDANT
13. Ronald A. Pallek, age 54, lives in Lakemoor, Illinois.  Pallek is the sole member of
RAP Enterprises LLC.
RELATED ENTITY
14. RAP Enterprises LLC (“RAP”) is an Illinois limited liability company established
by Pallek and based at Pallek’s home.  RAP was a co-owner of one of Pallek’s bank accounts, and
Pallek told one investor to make her check payable to RAP.
FACTS
A. Background
15. Between February 2021 and September 2023, Pallek raised at least $1.54 million
from approximately 87 investors in Illinois and Wisconsin, including residents of the Eastern
District of Wisconsin.  The investors included friends, acquaintances, and family members of
friends of Pallek.
16. Pallek was a one-person operation.  He raised all of the funds, placed all of the
trades, and prepared all of the account statements and correspondence with investors.

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17. Pallek deposited all of the investor funds into his personal bank accounts, including
one account on which RAP was a co-owner.  Pallek used those pooled investor funds to make
transfers to his brokerage account, to make Ponzi-like payments to investors, and to pay various
personal expenses.
18. In addition to investor funds, Pallek also deposited his own personal funds obtained
from unrelated sources into the same bank accounts.
19. Pallek was an “investment adviser”, as that term is defined in Section 202(a)(11) of
the Advisers Act [15 U.S.C. § 80b-2(a)(11)].  Pallek, for compensation, engaged in the business of
advising others as to the value of securities or as to the advisability of investing in, purchasing, or
selling securities.
20. Pallek provided investment advice to a “pooled investment vehicle”, as that term is
defined in Rule 206(4)-8(b) under the Advisers Act [17 C.F.R. § 275.206(4)-8(b)], which consisted
of funds provided by Pallek’s investors.
B. Pallek Lied About the Safety, Profitability, and Performance of the Securities he
Offered and Sold Investors

21. In meetings and on phone calls, Pallek told investors that he had been extremely
successful trading stocks and that 90% of his investment choices were profitable.  Pallek told
investors he had a “can’t lose opportunity” that he promised would double their money within a
year.
22. Pallek told investors he would pool their money and invest it using an “Iron Condor”
trading strategy.  Pallek represented to investors that he would pay them a pro rata share of the
trading profits, up to a maximum return of 100%.
23. The Iron Condor is an options trading strategy consisting of two put options (one
long and one short) and two call options (one long and one short).  The options have four different
strike prices and the same expiration date.  The strategy earns maximum profit when the underlying

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asset price closes between the two middle strike prices at expiration.  In other words, the trader
profits from low volatility in the underlying asset.  But the strategy can cause substantial losses
during times of market volatility.
24. Pallek told investors that he would be compensated for his services by retaining
trading profits that exceeded 100% per year.  Pallek further told investors that all of their funds
would be used solely for investment purposes.
25. Pallek lied to investors when he told them he would use all of their funds for
investment purposes.  Pallek used at least $324,000 of investor funds to make Ponzi-like payments
to other investors.
26. Pallek assured investors his trading strategy was safe and they would get their
money back.  To create the illusion of safety, Pallek falsely told investors he had $3 million in cash
reserves available to cover any potential trading losses.  Pallek told some investors the source of the
“reserve” fund was money he had received from a death in the family, and he told other investors
the money came from a settlement he received due to a work injury.
27. Pallek lied when he told investors there was a $3 million reserve fund.  During the
course of the scheme, the combined balance of Pallek’s bank and brokerage accounts never
exceeded $400,000, even including investor deposits.
28. Pallek also lied to investors when he told them the Iron Condor strategy was safe.
Pallek knew or was reckless in not knowing that the Iron Condor strategy can cause substantial
losses during times of market volatility.
29. Pallek’s misrepresentations to investors regarding the use of their funds, the
purported existence of a reserve fund, and the safety of his trading strategy were material.
Reasonable investors would find it important that Pallek was not engaging in a safe trading strategy
backed by a multi-million dollar reserve fund, but rather was undertaking a risky trading strategy

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without a reserve fund.  Reasonable investors would also find it important that, rather than investing
all of their funds, Pallek was instead using some of their money to make Ponzi-like payments to
other investors.
30. Each of Pallek’s investors signed a note entitled “Loan Agreement” in connection
with the investment.  The notes provided that Pallek would pay the investors twice the investment
amount at the end of one year, with no interim interest payments.  Pallek told investors the return on
their funds would come from profits generated by trading with the Iron Condor strategy.
31. The notes were form documents.  No investor negotiated the terms of the Loan
Agreements with Pallek.  No investor had any input into Pallek’s trading strategies.
32. The Loan Agreements were “securities”, as that term is defined in Section 2(a)(1) of
the Securities Act [15 U.S.C. § 77b(a)(1)] and Section 3(a)(10) of the Exchange Act [15 U.S.C.
§ 78c(a)(10)].
33. Pallek used the pooled investor funds he transferred to his brokerage account to
make trades employing the Iron Condor strategy, as well as other trading strategies.  Between
February 2021 and February 2024, Pallek lost approximately $870,000 in trades using the Iron
Condor strategy and approximately $121,000 in non-Iron Condor trades.  In total, Pallek sustained
trading losses of approximately $991,000.
34. From the beginning, Pallek’s trading results never lived up to his representations.
Although some individual securities trades were profitable, Pallek generally lost money on his
trading throughout the duration of the scheme.
35. Rather than disclose his trading failures to investors, Pallek instead created and sent
false periodic account statements to investors.  In those statements, Pallek falsely informed
investors that they had earned substantial profits.

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36. The periodic statements reported profits even when Pallek had, in reality, suffered
substantial trading losses.  For example, Pallek provided Investor 1 with an account statement
showing that a $10,000 investment by Investor 1 had grown to $12,480—an increase of 24.8%—as
a result of purported trades between October 14, 2021 and November 30, 2021.  But in reality,
during that time period, Pallek’s trading resulted in losses of approximately $127,000.
37. The periodic statements contained detailed information about Pallek’s purported
trades.  But much of the purported trading information Pallek reported was false.  Pallek reported
non-existent trades and reported false price, quantity, and profit information.  For example, Pallek
provided Investor 2 with an account statement showing that Investor 2 earned $7,452 as a result of
positions in 276 options contracts on an oil and gas company’s stock that Pallek opened on May 11,
2022 and closed on May 12, 2022.  But in reality, Pallek opened positions on only 12 options
contracts—3 long calls, 3 short calls, 3 long puts, and 3 short puts—on May 10, 2022 for that
company’s stock.  When he closed those positions the following day, Pallek’s total profit on them
was approximately $78.
38. The false account statements succeeded in convincing some investors that Pallek’s
investment strategy was profitable.  At least three investors invested additional money with Pallek
after receiving an account statement falsely reporting successful returns.  For example, Pallek
provided Investor 3 with an account statement showing that her initial $60,000 investment had
grown to $169,962—an increase of 183%—as a result of purported trades between January 2022
and August 2022.  In September 2023, Investor 3 gave Pallek additional money to invest.
Additionally, Investor 3’s father and husband invested money with Pallek in November 2022 and
June 2023, respectively.  But Pallek lied to Investor 3 when he reported those investment returns in
the statement.  In reality, between January 2022 and August 2022, Pallek’s trading resulted in losses
of approximately $43,000.

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39. The false statements Pallek made regarding his trading performance were material.
Reasonable investors would find it important that—rather than generating profits as he
represented—Pallek was in fact losing substantial amounts of money on an on-going basis.
C. Pallek Lied to Investors and Created Fake Documents to Avoid Paying Redemptions
40. In the fall of 2023, several investors sought to redeem their investments, plus the
promised 100% interest.  Pallek had no way to satisfy those requests.  Pallek did not receive any
new investor funds after September 2023.  By that time, his bank and brokerage accounts held a
combined balance of less than $2,000.
41.   In an effort to buy himself some time, Pallek told the investors seeking to redeem
that he was unable to pay them because his bank accounts had been frozen.  Pallek told some of
those investors that he had retained an attorney who specialized in resolving issues with banks, and
the attorney had succeeded in convincing the bank to release funds only for Pallek’s living
expenses.  All of these statements by Pallek were lies.  In reality, no bank froze any of Pallek’s
accounts.
42. To back up his false story about his bank accounts being frozen, Pallek showed some
investors a fabricated letter he had created on Bank 1 letterhead.  The fake letter was dated
September 22, 2023 and stated that Bank 1 had frozen both of Pallek’s accounts pending an audit.
43. Pallek later created a second fake letter on Bank 1 letterhead.  The second letter,
which was dated December 4, 2023, purported to provide an update regarding the frozen accounts.
The second letter falsely stated that the accounts held a collective balance of more than $1.25
million and further stated that Bank 1 anticipated initiating a phased release of the funds by March
1, 2024, assuming no fraudulent activity was detected in the audit.  As he had done with the first
fake letter, Pallek showed the fake December 4, 2023 letter to some investors to support his lie that
he could not pay redemptions because the bank had frozen his accounts.

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44. The misrepresentations Pallek made to investors between September and December
2023 regarding his purportedly frozen bank accounts were material.  Reasonable investors would
have considered it important that Pallek lacked funds to honor redemption requests and created fake
bank documents to conceal his true financial condition.
D. Pallek Violated the Federal Securities Laws
45. Beginning in January 2024, Pallek admitted to several investors that he had lost their
money trading.  In a phone call with one investor, Pallek admitted that he had made up the story
about his bank accounts being frozen so he would have more time to recoup his prior trading losses
before the investors took legal action against him.  Pallek told that same investor he would need
three years just to repay her principal, and that he was working at an outside job and also trying to
raise money through a purported online fundraising campaign and by marketing a board game he
claimed to have invented.
46. Pallek acted with scienter.  At the time he offered and sold the securities, Pallek
knew or recklessly disregarded that the representations he made to investors regarding the use of
their proceeds were false, misleading, and omitted material information.  Pallek knew or recklessly
disregarded that the representations he made to investors regarding the risks of his trading strategy
and the existence of a reserve fund were false, misleading, and omitted material information.  Pallek
knew or recklessly disregarded that the representations he made to investors regarding the profits,
and losses of his securities trading were false, misleading, and omitted material information.  Pallek
also knew or recklessly disregarded that the representations he made to investors regarding the
purported freezing of his bank accounts and his inability to make redemption payments were false,
misleading, and omitted material information.
47. In making these representations and omissions, Pallek also acted negligently.

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48. Pallek made the false and misleading statements to investors to entice them to enter
into the Loan Agreements and provide him with funds for investment purposes.  Investors in fact
entered into the Loan Agreements with Pallek and provided him with funds for investment
purposes.
COUNT I
Fraud in the Offer or Sale of Securities
[Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a)]

49. Paragraphs 1-48 are hereby realleged and incorporated herein by reference.
50. By engaging in the acts and conduct described in this Complaint, Defendant Pallek,
directly or indirectly, in the offer or sale of securities, by use of the means or instruments of
transportation or communication in interstate commerce or by use of the mails, used and employed
devices, schemes, or artifices to defraud; obtained money or property by means of untrue statements
of a material fact or an omission to state material facts necessary in order to make the statements
made, in the light of the circumstances under which they were made, not misleading; and engaged
in transactions, practices, or courses of business which operated or would operate as a fraud and
deceit upon the purchaser.
51. Pallek engaged in the fraudulent conduct described above intentionally, recklessly,
and/or negligently.
52. By reason of the foregoing, Defendant Pallek, directly or indirectly, violated, and,
unless enjoined, will continue to violate Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a).
COUNT II
Fraud in Connection with the Purchase or Sale of Securities
[Exchange Section 10(b), 15 U.S.C. § 78j(b), and Rule 10b-5,   17 C.F.R. § 240.10b-5]

53. Paragraphs 1-48 are hereby realleged and incorporated herein by reference.
54. By reason of the acts and conduct described in this Complaint, Defendant Pallek
directly or indirectly, in connection with the purchase or sale of securities, by the use of means or

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instrumentalities of interstate commerce or of the mails or any facility of a national securities
exchange: (a) used and employed devices, schemes, or artifices to defraud; (b) made untrue
statements of a material fact or omitted to state material facts necessary in order to make the
statements made, in the light of the circumstances under which they were made, not misleading;
and (c) engaged in acts, practices, or courses of business which operated or would operate as a
fraud and deceit upon any person.
55. Pallek engaged in the fraudulent conduct described above intentionally or recklessly.
56. By reason of the foregoing, Pallek, directly or indirectly, violated, and, unless
enjoined, will continue to violate Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule
10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder.
COUNT III
Fraudulent, Deceptive, or Manipulative Conduct by an Investment Advisor
[Advisers Act Section 206(4), 15 U.S.C. § 80b-6(4), and Rule 206(4)-8 thereunder, 17 C.F.R.
§ 275.206(4)-8]

57. Paragraphs 1-48 are hereby realleged and incorporated herein by reference.
58. By reason of the acts and conduct described in this Complaint, Defendant Pallek, an
investment adviser, directly or indirectly, engaged in acts, practices, and/or courses of business
which were fraudulent, deceptive, and/or manipulative.
59. By reason of the acts and conduct described in this Complaint, Defendant Pallek
made untrue statements of fact and/or omitted to state material facts necessary to make the
statements made not misleading to investors or prospective investors in a pooled investment
vehicle.
60. By reason of the acts and conduct described in this Complaint, Defendant Pallek
engaged in fraudulent, deceptive, or manipulative conduct with respect to investors and/or
prospective investors in a pooled investment vehicle.

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61. Pallek engaged in the conduct described above intentionally, recklessly, and/or
negligently.
62. By reason of the foregoing, Pallek, directly or indirectly, violated, and unless
enjoined, will continue to violate Section 206(4) of the Advisers Act, 15 U.S.C. § 80b-6(4), and
Rule 206(4)-8, 17 C.F.R. § 275-6(4)-8, promulgated thereunder.
PRAYER FOR RELIEF

WHEREFORE, the SEC respectfully requests that this Court:
I.
Issue a judgment, in a form consistent with Rule 65(d) of the Federal Rules of Civil
Procedure, permanently enjoining Defendant Pallek, and his officers, agents, servants, employees
and attorneys, and those persons in active concert or participation with any of them, who receive
actual notice of the judgment by personal service or otherwise, and each of them, from violating
Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].

II.
Issue a judgment, in a form consistent with Rule 65(d) of the Federal Rules of Civil
Procedure, permanently enjoining Defendant Pallek, and his officers, agents, servants, employees
and attorneys, and those persons in active concert or participation with any of them, who receive
actual notice of the judgment by personal service or otherwise, and each of them, from violating
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].
III.
Issue a judgment, in a form consistent with Rule 65(d) of the Federal Rules of Civil
Procedure, permanently enjoining Defendant Pallek, and his officers, agents, servants, employees
and attorneys, and those persons in active concert or participation with any of them, who receive

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actual notice of the judgment by personal service or otherwise, and each of them, from violating
Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 206(4)-8 [17 C.F.R. § 275-
6(4)-8] thereunder.
IV.
Order Defendant Pallek to pay disgorgement of any unjust enrichment he received as a
result of the misconduct alleged, together with prejudgment interest thereon, under Sections
21(d)(3), 21(d)(5) and 21(d)(7) of the Exchange Act, 15 U.S.C. §§ 78u(d)(3), 78u(d)(5), 78u(d)(7).
V.
Order Defendant Pallek to pay civil monetary penalties pursuant to 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)].
VI.
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.
VII.
Grant such other and further relief as this Court may determine to be just and necessary.

JURY DEMAND
The SEC demands a trial by jury on all claims so triable.

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Dated: March 10, 2025. UNITED STATES SECURITIES AND
 EXCHANGE COMMISSION

 By:  /s/ Christopher H. White
 Christopher H. White (IL Bar No. 6280031)
 Scott B. Tandy (IL Bar No. 6226214)

 175 West Jackson Blvd, Suite 1450
 Chicago, IL 60604
 Telephone: (312) 353-7390
 E-  mail: [email protected]

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IN THE UNITED STATES DISTRICT COURT 
FOR THE EASTERN DISTRICT OF WISCONSIN  

 
UNITED STATES SECURITIES AND 
EXCHANGE COMMISSION, 
 

Plaintiff,     
 
v. 
 
RONALD A. PALLEK, 
 

Defendant. 
 

 
 
 
 
              Case No: 
 
              (Jury Demanded) 
 
 
 

 
COMPLAINT 

 
 

Plaintiff, United States Securities and Exchange Commission (“SEC” or the “Commission”), 

files this Complaint and alleges as follows: 

NATURE OF THE ACTION 

1. Defendant Ronald A. Pallek conducted a fraudulent securities offering by making 

false promises to double investors’ money in only a year using an “Iron Condor” options trading 

strategy.  By virtue of his lies, between February 2021 and September 2023, Pallek raised more 

than $1.54 million from at least 87 investors.  

2. Throughout the course of the scheme, Pallek misrepresented the risks of his options-

trading strategy, lied to investors about how he would use their funds, and falsely told investors he 

had sufficient reserve funds to cover any potential losses.  Pallek also sent investors false account 

statements purporting to show highly successful trading. 

3. In reality, Pallek lost approximately $991,000 trading options and other securities.  

Pallek also used some investor funds to make Ponzi-like payments to early investors. 

4. In the fall of 2023, after some investors requested the return of their funds, Pallek 

falsely told them the bank had frozen his accounts.  Pallek also showed investors fabricated 

Case 2:25-cv-00364     Filed 03/10/25     Page 1 of 14     Document 1



2  

documents he had created that purported to show both that his bank accounts had been frozen and 

that they contained more than $1.25 million. 

5. On March 10, 2025, Pallek was criminally charged by the filing of an Information in 

this District, for conduct similar to that alleged herein. See United States v. Pallek, No. 25-CR-43.  

6. Through his conduct, Pallek violated, and unless restrained will continue to violate, 

Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)], 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], and Section 206(4) of the Investment Advisers Act of 1940 (“Advisers 

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

7. To hold Pallek accountable, to return funds to his victims, and to prevent him from 

harming future investors, the SEC seeks a permanent injunction prohibiting securities fraud, 

disgorgement and prejudgment interest, and civil penalties. 

JURISDICTION AND VENUE 
 

8. The Commission brings this action to restrain Pallek from engaging in the 

transactions, acts, practices and courses of business alleged in this Complaint, and transactions, 

acts, practices and courses of business of similar purport and object, for disgorgement of illegally 

obtained funds, civil money penalties, and other equitable relief. 

9. This Court has jurisdiction over this action pursuant to Sections 20(b)-(d) and 22(a) 

of the Securities Act [15 U.S.C. §§ 77t(b)-(d) and 77v(a)], Sections 21(d)-(e) and 27(a) of the 

Exchange Act [15 U.S.C. §§ 78u(d)-(e) and 78aa], and Sections 209(d)-(e) and 214(a) of the 

Advisers Act [15 U.S.C. §§ 80b-9(d)-(e) and 80b-14(a)]. 

10. Venue lies 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(a) of the Advisers 

Act [15 U.S.C. § 80b-14(a)], because transactions, acts, practices and courses of business constituting 

Case 2:25-cv-00364     Filed 03/10/25     Page 2 of 14     Document 1



3  

violations of the federal securities laws occurred, and Defendant transacted business, within the Eastern 

District of Wisconsin and elsewhere. 

11. Defendant, directly and indirectly, made use of the means or instrumentalities of 

interstate commerce, of the mails, or of the facilities of a national securities exchange in connection 

with the transactions, acts, practices and courses of business alleged in this Complaint. 

12. There is a reasonable likelihood that Defendant will, unless enjoined, continue to 

engage in the transactions, acts, practices and courses of business set forth in this complaint, and 

transactions, acts, practices and courses of business of similar purport and object. 

DEFENDANT 

13. Ronald A. Pallek, age 54, lives in Lakemoor, Illinois.  Pallek is the sole member of 

RAP Enterprises LLC. 

RELATED ENTITY 

14. RAP Enterprises LLC (“RAP”) is an Illinois limited liability company established 

by Pallek and based at Pallek’s home.  RAP was a co-owner of one of Pallek’s bank accounts, and 

Pallek told one investor to make her check payable to RAP. 

FACTS 

A. Background 

15. Between February 2021 and September 2023, Pallek raised at least $1.54 million 

from approximately 87 investors in Illinois and Wisconsin, including residents of the Eastern 

District of Wisconsin.  The investors included friends, acquaintances, and family members of 

friends of Pallek. 

16. Pallek was a one-person operation.  He raised all of the funds, placed all of the 

trades, and prepared all of the account statements and correspondence with investors. 

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17. Pallek deposited all of the investor funds into his personal bank accounts, including 

one account on which RAP was a co-owner.  Pallek used those pooled investor funds to make 

transfers to his brokerage account, to make Ponzi-like payments to investors, and to pay various 

personal expenses. 

18. In addition to investor funds, Pallek also deposited his own personal funds obtained 

from unrelated sources into the same bank accounts. 

19. Pallek was an “investment adviser”, as that term is defined in Section 202(a)(11) of 

the Advisers Act [15 U.S.C. § 80b-2(a)(11)].  Pallek, for compensation, engaged in the business of 

advising others as to the value of securities or as to the advisability of investing in, purchasing, or 

selling securities. 

20. Pallek provided investment advice to a “pooled investment vehicle”, as that term is 

defined in Rule 206(4)-8(b) under the Advisers Act [17 C.F.R. § 275.206(4)-8(b)], which consisted 

of funds provided by Pallek’s investors. 

B. Pallek Lied About the Safety, Profitability, and Performance of the Securities he 
Offered and Sold Investors 
 
21. In meetings and on phone calls, Pallek told investors that he had been extremely 

successful trading stocks and that 90% of his investment choices were profitable.  Pallek told 

investors he had a “can’t lose opportunity” that he promised would double their money within a 

year. 

22. Pallek told investors he would pool their money and invest it using an “Iron Condor” 

trading strategy.  Pallek represented to investors that he would pay them a pro rata share of the 

trading profits, up to a maximum return of 100%. 

23. The Iron Condor is an options trading strategy consisting of two put options (one 

long and one short) and two call options (one long and one short).  The options have four different 

strike prices and the same expiration date.  The strategy earns maximum profit when the underlying 

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asset price closes between the two middle strike prices at expiration.  In other words, the trader 

profits from low volatility in the underlying asset.  But the strategy can cause substantial losses 

during times of market volatility. 

24. Pallek told investors that he would be compensated for his services by retaining 

trading profits that exceeded 100% per year.  Pallek further told investors that all of their funds 

would be used solely for investment purposes. 

25. Pallek lied to investors when he told them he would use all of their funds for 

investment purposes.  Pallek used at least $324,000 of investor funds to make Ponzi-like payments 

to other investors. 

26. Pallek assured investors his trading strategy was safe and they would get their 

money back.  To create the illusion of safety, Pallek falsely told investors he had $3 million in cash 

reserves available to cover any potential trading losses.  Pallek told some investors the source of the 

“reserve” fund was money he had received from a death in the family, and he told other investors 

the money came from a settlement he received due to a work injury. 

27. Pallek lied when he told investors there was a $3 million reserve fund.  During the 

course of the scheme, the combined balance of Pallek’s bank and brokerage accounts never 

exceeded $400,000, even including investor deposits. 

28. Pallek also lied to investors when he told them the Iron Condor strategy was safe.  

Pallek knew or was reckless in not knowing that the Iron Condor strategy can cause substantial 

losses during times of market volatility. 

29. Pallek’s misrepresentations to investors regarding the use of their funds, the 

purported existence of a reserve fund, and the safety of his trading strategy were material.  

Reasonable investors would find it important that Pallek was not engaging in a safe trading strategy 

backed by a multi-million dollar reserve fund, but rather was undertaking a risky trading strategy 

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without a reserve fund.  Reasonable investors would also find it important that, rather than investing 

all of their funds, Pallek was instead using some of their money to make Ponzi-like payments to 

other investors.   

30. Each of Pallek’s investors signed a note entitled “Loan Agreement” in connection 

with the investment.  The notes provided that Pallek would pay the investors twice the investment 

amount at the end of one year, with no interim interest payments.  Pallek told investors the return on 

their funds would come from profits generated by trading with the Iron Condor strategy. 

31. The notes were form documents.  No investor negotiated the terms of the Loan 

Agreements with Pallek.  No investor had any input into Pallek’s trading strategies. 

32. The Loan Agreements were “securities”, as that term is defined in Section 2(a)(1) of 

the Securities Act [15 U.S.C. § 77b(a)(1)] and Section 3(a)(10) of the Exchange Act [15 U.S.C. 

§ 78c(a)(10)]. 

33. Pallek used the pooled investor funds he transferred to his brokerage account to 

make trades employing the Iron Condor strategy, as well as other trading strategies.  Between 

February 2021 and February 2024, Pallek lost approximately $870,000 in trades using the Iron 

Condor strategy and approximately $121,000 in non-Iron Condor trades.  In total, Pallek sustained 

trading losses of approximately $991,000. 

34. From the beginning, Pallek’s trading results never lived up to his representations.  

Although some individual securities trades were profitable, Pallek generally lost money on his 

trading throughout the duration of the scheme. 

35. Rather than disclose his trading failures to investors, Pallek instead created and sent 

false periodic account statements to investors.  In those statements, Pallek falsely informed 

investors that they had earned substantial profits. 

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36. The periodic statements reported profits even when Pallek had, in reality, suffered 

substantial trading losses.  For example, Pallek provided Investor 1 with an account statement 

showing that a $10,000 investment by Investor 1 had grown to $12,480—an increase of 24.8%—as 

a result of purported trades between October 14, 2021 and November 30, 2021.  But in reality, 

during that time period, Pallek’s trading resulted in losses of approximately $127,000. 

37. The periodic statements contained detailed information about Pallek’s purported 

trades.  But much of the purported trading information Pallek reported was false.  Pallek reported 

non-existent trades and reported false price, quantity, and profit information.  For example, Pallek 

provided Investor 2 with an account statement showing that Investor 2 earned $7,452 as a result of 

positions in 276 options contracts on an oil and gas company’s stock that Pallek opened on May 11, 

2022 and closed on May 12, 2022.  But in reality, Pallek opened positions on only 12 options 

contracts—3 long calls, 3 short calls, 3 long puts, and 3 short puts—on May 10, 2022 for that 

company’s stock.  When he closed those positions the following day, Pallek’s total profit on them 

was approximately $78.     

38. The false account statements succeeded in convincing some investors that Pallek’s  

investment strategy was profitable.  At least three investors invested additional money with Pallek 

after receiving an account statement falsely reporting successful returns.  For example, Pallek 

provided Investor 3 with an account statement showing that her initial $60,000 investment had 

grown to $169,962—an increase of 183%—as a result of purported trades between January 2022 

and August 2022.  In September 2023, Investor 3 gave Pallek additional money to invest.  

Additionally, Investor 3’s father and husband invested money with Pallek in November 2022 and 

June 2023, respectively.  But Pallek lied to Investor 3 when he reported those investment returns in 

the statement.  In reality, between January 2022 and August 2022, Pallek’s trading resulted in losses 

of approximately $43,000. 

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39. The false statements Pallek made regarding his trading performance were material.  

Reasonable investors would find it important that—rather than generating profits as he 

represented—Pallek was in fact losing substantial amounts of money on an on-going basis. 

C. Pallek Lied to Investors and Created Fake Documents to Avoid Paying Redemptions 

40. In the fall of 2023, several investors sought to redeem their investments, plus the 

promised 100% interest.  Pallek had no way to satisfy those requests.  Pallek did not receive any 

new investor funds after September 2023.  By that time, his bank and brokerage accounts held a 

combined balance of less than $2,000.  

41.   In an effort to buy himself some time, Pallek told the investors seeking to redeem 

that he was unable to pay them because his bank accounts had been frozen.  Pallek told some of 

those investors that he had retained an attorney who specialized in resolving issues with banks, and 

the attorney had succeeded in convincing the bank to release funds only for Pallek’s living 

expenses.  All of these statements by Pallek were lies.  In reality, no bank froze any of Pallek’s 

accounts. 

42. To back up his false story about his bank accounts being frozen, Pallek showed some 

investors a fabricated letter he had created on Bank 1 letterhead.  The fake letter was dated 

September 22, 2023 and stated that Bank 1 had frozen both of Pallek’s accounts pending an audit. 

43. Pallek later created a second fake letter on Bank 1 letterhead.  The second letter, 

which was dated December 4, 2023, purported to provide an update regarding the frozen accounts.  

The second letter falsely stated that the accounts held a collective balance of more than $1.25 

million and further stated that Bank 1 anticipated initiating a phased release of the funds by March 

1, 2024, assuming no fraudulent activity was detected in the audit.  As he had done with the first 

fake letter, Pallek showed the fake December 4, 2023 letter to some investors to support his lie that 

he could not pay redemptions because the bank had frozen his accounts. 

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44. The misrepresentations Pallek made to investors between September and December 

2023 regarding his purportedly frozen bank accounts were material.  Reasonable investors would 

have considered it important that Pallek lacked funds to honor redemption requests and created fake 

bank documents to conceal his true financial condition. 

D. Pallek Violated the Federal Securities Laws 

45. Beginning in January 2024, Pallek admitted to several investors that he had lost their 

money trading.  In a phone call with one investor, Pallek admitted that he had made up the story 

about his bank accounts being frozen so he would have more time to recoup his prior trading losses 

before the investors took legal action against him.  Pallek told that same investor he would need 

three years just to repay her principal, and that he was working at an outside job and also trying to 

raise money through a purported online fundraising campaign and by marketing a board game he 

claimed to have invented. 

46. Pallek acted with scienter.  At the time he offered and sold the securities, Pallek 

knew or recklessly disregarded that the representations he made to investors regarding the use of 

their proceeds were false, misleading, and omitted material information.  Pallek knew or recklessly 

disregarded that the representations he made to investors regarding the risks of his trading strategy 

and the existence of a reserve fund were false, misleading, and omitted material information.  Pallek 

knew or recklessly disregarded that the representations he made to investors regarding the profits, 

and losses of his securities trading were false, misleading, and omitted material information.  Pallek 

also knew or recklessly disregarded that the representations he made to investors regarding the 

purported freezing of his bank accounts and his inability to make redemption payments were false, 

misleading, and omitted material information. 

47. In making these representations and omissions, Pallek also acted negligently. 

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48. Pallek made the false and misleading statements to investors to entice them to enter 

into the Loan Agreements and provide him with funds for investment purposes.  Investors in fact 

entered into the Loan Agreements with Pallek and provided him with funds for investment 

purposes. 

COUNT I  
Fraud in the Offer or Sale of Securities 

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

49. Paragraphs 1-48 are hereby realleged and incorporated herein by reference. 

50. By engaging in the acts and conduct described in this Complaint, Defendant Pallek, 

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

transportation or communication in interstate commerce or by use of the mails, used and employed 

devices, schemes, or artifices to defraud; obtained money or property by means of untrue statements 

of a material fact or an omission to state material facts necessary in order to make the statements 

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

in transactions, practices, or courses of business which operated or would operate as a fraud and 

deceit upon the purchaser. 

51. Pallek engaged in the fraudulent conduct described above intentionally, recklessly, 

and/or negligently. 

52. By reason of the foregoing, Defendant Pallek, directly or indirectly, violated, and, 

unless enjoined, will continue to violate Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a). 

COUNT II 
Fraud in Connection with the Purchase or Sale of Securities 

[Exchange Section 10(b), 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5] 
 

53. Paragraphs 1-48 are hereby realleged and incorporated herein by reference. 

54. By reason of the acts and conduct described in this Complaint, Defendant Pallek 

directly or indirectly, in connection with the purchase or sale of securities, by the use of means or 

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instrumentalities of interstate commerce or of the mails or any facility of a national securities 

exchange: (a) used and employed devices, schemes, or artifices to defraud; (b) made untrue 

statements of a material fact or omitted to state material facts necessary in order to make the 

statements made, in the light of the circumstances under which they were made, not misleading; 

and (c) engaged in acts, practices, or courses of business which operated or would operate as a 

fraud and deceit upon any person. 

55. Pallek engaged in the fraudulent conduct described above intentionally or recklessly. 

56. By reason of the foregoing, Pallek, directly or indirectly, violated, and, unless 

enjoined, will continue to violate Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 

10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder. 

COUNT III 
Fraudulent, Deceptive, or Manipulative Conduct by an Investment Advisor 

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

 
57. Paragraphs 1-48 are hereby realleged and incorporated herein by reference. 

58. By reason of the acts and conduct described in this Complaint, Defendant Pallek, an 

investment adviser, directly or indirectly, engaged in acts, practices, and/or courses of business 

which were fraudulent, deceptive, and/or manipulative. 

59. By reason of the acts and conduct described in this Complaint, Defendant Pallek 

made untrue statements of fact and/or omitted to state material facts necessary to make the 

statements made not misleading to investors or prospective investors in a pooled investment 

vehicle. 

60. By reason of the acts and conduct described in this Complaint, Defendant Pallek 

engaged in fraudulent, deceptive, or manipulative conduct with respect to investors and/or 

prospective investors in a pooled investment vehicle. 

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61. Pallek engaged in the conduct described above intentionally, recklessly, and/or 

negligently. 

62. By reason of the foregoing, Pallek, directly or indirectly, violated, and unless 

enjoined, will continue to violate Section 206(4) of the Advisers Act, 15 U.S.C. § 80b-6(4), and 

Rule 206(4)-8, 17 C.F.R. § 275-6(4)-8, promulgated thereunder. 

PRAYER FOR RELIEF 
 

WHEREFORE, the SEC respectfully requests that this Court: 

I. 

Issue a judgment, in a form consistent with Rule 65(d) of the Federal Rules of Civil 

Procedure, permanently enjoining Defendant Pallek, and his officers, agents, servants, employees 

and attorneys, and those persons in active concert or participation with any of them, who receive 

actual notice of the judgment by personal service or otherwise, and each of them, from violating 

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

II. 

Issue a judgment, in a form consistent with Rule 65(d) of the Federal Rules of Civil 

Procedure, permanently enjoining Defendant Pallek, and his officers, agents, servants, employees 

and attorneys, and those persons in active concert or participation with any of them, who receive 

actual notice of the judgment by personal service or otherwise, and each of them, from violating 

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]. 

III. 

Issue a judgment, in a form consistent with Rule 65(d) of the Federal Rules of Civil 

Procedure, permanently enjoining Defendant Pallek, and his officers, agents, servants, employees 

and attorneys, and those persons in active concert or participation with any of them, who receive 

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actual notice of the judgment by personal service or otherwise, and each of them, from violating 

Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 206(4)-8 [17 C.F.R. § 275-

6(4)-8] thereunder. 

IV. 

Order Defendant Pallek to pay disgorgement of any unjust enrichment he received as a 

result of the misconduct alleged, together with prejudgment interest thereon, under Sections 

21(d)(3), 21(d)(5) and 21(d)(7) of the Exchange Act, 15 U.S.C. §§ 78u(d)(3), 78u(d)(5), 78u(d)(7). 

V. 

Order Defendant Pallek to pay civil monetary penalties pursuant to 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)]. 

VI. 

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. 

VII. 

Grant such other and further relief as this Court may determine to be just and necessary. 

 

JURY DEMAND 

The SEC demands a trial by jury on all claims so triable.   

 
 
 
 

 
 

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Dated: March 10, 2025. UNITED STATES SECURITIES AND 
 EXCHANGE COMMISSION 
 
 
 By:  /s/ Christopher H. White 
 Christopher H. White (IL Bar No. 6280031) 
 Scott B. Tandy (IL Bar No. 6226214) 
  
 175 West Jackson Blvd, Suite 1450 
 Chicago, IL 60604 
 Telephone: (312) 353-7390 
 E-mail: [email protected] 
   

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	JURISDICTION AND VENUE
	COUNT I
	Fraud in the Offer or Sale of Securities
	[Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a)]
	COUNT II
	Fraud in Connection with the Purchase or Sale of Securities
	[Exchange Section 10(b), 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5]
	PRAYER FOR RELIEF