SEC v. Andrew K. Proctor; and Atlas JG, LLC, No. 1:16-cv-00437, Central District of California (June 14, 2016) — Complaint

IN
THE
UNITED
STATES
DISTRICT
COURT
FOR
THE
DISTRICT
OF
DELAWARE
SECURITIES
AND
EXCHANGE
COMMISSION,
v.
ANDREW
K.
PROCTOR,
and
ATLAS
JG,
LLC,
Plaintiff,
Defendants.
COMPLAINT
Civil
Action
No.
Jury
Trial
Demanded
Plaintiff
Securities
and
Exchange
Commission
(the
"Commission
")
alleges
as
follows:
SUMMARY
This
matter
involves
an
offering
fraud
conducted
by
Defendant
Andrew
K.
Proctor
(
"Proctor
")
and
Defendant
Atlas
JG,
LLC
(
"Atlas
"),
a
Delaware
limited
liability
company
formed
by
Proctor
in
2006.
2.
From
2007
through
2011,
Proctor,
through
Atlas,
raised
more
than
$22
million
from
at
least
200
overseas
investors
through
a
fraudulent
offering
of
purported
bonds
promising
annual
returns
of
eight
to
nine
percent.
3.
Proctor
induced
investors
to
purchase
these
fraudulent
securities
by
making
materially
false
and
misleading
statements
and
omissions
concerning,
among
other
things,
the
use
of
investor
funds.
4.
Proctor
told
prospective
investors
that
their
funds
would
be
used
to
purchase
receivables
from
homebuilding
subcontractors
at
a
discount,
and
that
Atlas
would
profit
from

the
difference
between
the
discounted
price
and
the
amount
ultimately
collected
from
homebuilders.
5.
In
actuality,
Atlas
used
less
than
ten
percent
of
the
funds
raised
to
buy
receivables
from
homebuilding
subcontractors
as
promised,
the
last
purchase
occurring
in
2008.
However,
Proctor
continued
to
fraudulently
raise
funds
from
investors
for
several
years
thereafter.
6.
Contrary
to
what
investors
were
told,
Proctor
used
at
least
$11.2
million
of
investor
funds
to
make
so-
called
"interest"
and
"principal"
payments
to
investors.
He
used
the
balance
of
the
proceeds
raised
to,
among
other
things,
fund
offshore
investments
in
Asia,
speculate
in
stock
options
and
other
derivatives,
and
finance
his
lifestyle.
Proctor
took
at
least
$2.8
million
to
pay
personal
expenses,
including
his
mortgage,
his
credit
card
bills,
and
his
children's
tuition.
7.
By
knowingly
or
recklessly
engaging
in
the
conduct
described
in
this
Complaint,
Defendants
Proctor
and
Atlas
violated,
and
unless
enjoined
will
continue
to
violate,
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
lOb
-5
thereunder
[17
C.F.R.
§
240.1Ob
-5].
JURISDICTION
AND
VENUE
The
Commission
brings
this
action
pursuant
to
Sections
20(b)
and
20(d)
of
the
Securities
Act
[15
U.S.C.
§§
77t(b)
and
77t(d)],
and
Section
21(d)
of
the
Exchange
Act
[15
U.S.C.
§
78u(d)],
to
enjoin
such
acts,
transactions,
practices,
and
courses
of
business,
and
to
obtain
disgorgement,
prejudgment
interest,
civil
penalties,
and
such
other
and
further
relief
as
the
Court
may
deem
just
and
appropriate.
9.
This
Court
has
jurisdiction
over
this
action
pursuant
to
Sections
20(b)
and
22(a)

of
the
Securities
Act
[15
U.S.C.
§§
77t(b)
and
77v(a)]
and
Sections
21(d),
21(e)
and
27
of
the
Exchange
Act
[15
U.S.C.
§§
78u(d),
78u(e)
and
78aa].
10.
Venue
in
this
District
is
proper
pursuant
to
Section
22(a)
of
the
Securities
Act
[15
U.S.C.
§
77v(a)]
and
Section
2'~
of
the
Exchange
Act
[15
U.S.C.
§
78aa].
Among
other
things,
certain
of
the
acts,
transactions,
practices,
and
courses
of
business
constituting
the
violations
alleged
herein
occurred
within
the
District
of
Delaware.
DEFENDANTS
11.
Andrew
K.
Proctor,
age
59,
resides
in
Perris,
California.
Proctor
is
the
founder
and
sole
managing
member
of
Defendant
Atlas.
On
January
11,
2005,
Proctor
pled
guilty
to
one
count
of
conspiracy
to
commit
wire
fraud
and
securities
fraud
in
the
Central
District
of
California
in
connection
with
a
penny
stock
pump-
and
-dump
scheme
and
was
sentenced
to
six
months
of
home
detention,
a
$20,000
fine,
and
three
years
of
probation.
In
addition,
Proctor
was
barred
by
the
Commission
from
participating
in
the
penny
stock
market.
12.
Atlas
JG,
LLC
is
a
Delaware
limited
liability
company
formed
by
Proctor
in
2006.
From
2007
through
2011,
Atlas
issued
at
least
four
series
of
purported
bonds.
13.
The
Commission,
Proctor
and
Atlas
have
agreed
that
the
running
of
any
statute
of
limitations
applicable
to
any
action
against
Proctor
and
Atlas
authorized,
instituted
or
brought
by
the
Commission
arising
out
of
the
Commission's
investigation
of
the
facts
described
herein,
including
any
sanctions
or
relief
that
may
be
imposed
therein,
has
been
tolled
and
suspended
for
the
period
from
November
1,
2014
through
June
15,
2016.
FACTS
A.
Formation
of
Atlas
JG,
LLC
14.
During
the
real
estate
boom
of
the
early
2000s,
large
U.S.
homebuilders
often

took months to
pay their subcontractors.
Without a
stream of payment, subcontractors
could not
accept new work
because they were unable to
meet their cash needs.
15. In 2006,
Proctor formed Atlas,
purportedly to provide
capital to subcontractors
while
the subcontractors
waited for builders to pay
for the work they
had performed.
16.
At all relevant times, Atlas
acted by and
through Proctor.
17.
Through a friend,
Proctor
was
introduced to an
individual in Hong Kong (
"Hong
Kong Business
Associate") who was a
principal of a British
Virgin Islands corporation that
purported to be
in the business of
natural resources trading and
logistics. The Hong Kong
Business
Associate assisted
Proctor in marketing Atlas bonds
to investors in Taiwan.
18.
During the
period from 2007
through 2011, Proctor issued
at least four series of
purported bonds to
over
200
overseas investors
—all of whom appear to be
located in Taiwan—
raising approximately $22.3
million.
19.
Proctor engaged
a registered transfer
agent located in Delaware to serve as
Atlas'
transfer agent,
paying agent, and
registrar.
20. To
purchase the bonds,
investors completed and
signed subscription agreements,
which were
sent
to
Proctor and
countersigned by him in the U.S.
on behalf of Atlas.
21.
Investors wired their
purchase payments
directly to an Atlas escrow account
held
at the
transfer agent in
Delaware. After an
investment, purported interest and redemption
payments
were sent to investors
from
this
same Delaware
account.
B.
Material Misrepresentations
And Omissions
22.
Proctor drafted
written offering documents that
were used to solicit investors
for
Atlas.
The offering documents
for each of the
four bond series consisted of a bond
purchase
agreement, a
short six-page summary
of the offering, and a
subscription agreement.
4

23.
In
the
written
offering
documents,
Proctor
claimed
that
Atlas
would
make
money
by
purchasing
receivables
from
homebuilding
subcontractors
at
a
discount:
Atlas
would
purchase
a
subcontractor's
receivable
due
from
the
homebuilder,
along
with
the
attached
lien
rights,
for
approximately
75
-90%
of
the
receivable.
Proctor
claimed
that
when
the
homebuilder
paid
the
subcontractor,
the
funds
would
be
paid
to
Atlas,
and
Atlas'
profit
would
be
the
10
-25%
difference
between
the
amount
it
paid
the
subcontractor
for
the
receivable
and
the
amount
paid
in
full
by
the
homebuilder
to
satisfy
its
obligation.
Proctor
claimed
that
investor
returns
would
be
generated
from
these
profits.
24.
The
offering
documents
for
each
of
the
four
bond
series
contained
the
same
disclosures
regarding
the
use
of
investor
proceeds:
"The
proceeds
of
the
Offering
are
to
be
used
to
purchase
receivables
with
lien
rights
due
from
national
homebuilding
companies
from
[sub]contractors
for
completed
work
and
materials
supplied."
25.
The
offering
documents
stated
that
investors
would
receive
eight
to
nine
percent
annual
interest
paid
quarterly
and
that
the
bonds
would
mature
in
five
years
(the
first
series
on
December
31,
2012,
the
second
on
December
31,
2013,
the
third
on
December
31,
2014,
and
the
fourth
on
December
31,
2015).
26.
The
offering
documents
provided
that
investors
could
redeem
prior
to
the
maturity
date
with
60
days
written
notice
or,
at
maturity,
Atlas
would
repay
the
principal
investment
in
full.
27.
The
offering
documents
also
stated
that
Atlas
could
engage
a
placement
agent
and
pay
a
1.25%
fee
to
that
placement
agent.
C.
Misuse
of
Investor
Funds
28.
Contrary
to
what
investors
were
told,
Proctor
used
more
than
90%
of
investor

funds
for purposes other than
the purchase of receivables from
homebuilding subcontractors.
29.
Between 2007 and 2011, Atlas
used only
$1.9
million of investor funds to
purchase
homebuilding receivables,
and all of those purchases occurred in 2007 and 2008.
30. In
May 2008, Proctor used Atlas funds to
enroll himself in a
class
on writing call
options—a highly risky form
of derivatives trading.
31. Less than three
weeks later, Proctor began purchasing stock options
and other
derivatives
with investor money.
32. Proctor moved
investor funds through a web of shell companies and accounts
that
made tracing and
detection of his activities
difficult.
33.
From 2008 through 2011,
Proctor funneled approximately $3.1 million from Atlas
bank accounts to
two brokerage accounts in
the name of Ocean Funding LLC, a Delaware
company
that Proctor controlled. Proctor
used this $3.1 million to speculate in the stock and
options market.
34. For
example, from May 28 to July 25, 2008,
Proctor
executed
several hundred
stock and options transactions,
including in complex instruments such as calls, spreads,
and
straddles. Proctor
lost nearly $1 million on this trading alone.
35. From
December 2007 through September
2011, Proctor
also
channeled over $7
million to his
Hong Kong Business Associate's
natural
resources
company. Of
this
amount,
approximately
$2.7 million was purportedly for various coal
shipping
investments;
approximately $2.2 was
purportedly for payment of "marketing fees;" and the remaining
balance of
$2.1 million
was
purportedly for payment of various
"agent
deposit[s],"
"collateral,"
and
"advance[s]."
36. In addition,
from January 2010 through July
2012,
Proctor transferred more
than

$3
million
to
Commercial
Acceptance
LLC,
a
Delaware
company
that
he
controlled.
The
majority
of
those
funds
were
then
purportedly
used
to
finance
coal
trading
activities
in
Asia.
For
example,
on
January
10,
2011,
Proctor
wired
$600,000
from
an
Atlas
bank
account
to
Commercial
Acceptance
LLC.
Two
days
later,
Commercial
Acceptance
LLC
wired
$500,000
to
the
Hong
Kong
Business
Associate's
natural
resources
company
referencing
"Indonesian
Coal
Trade."
37.
Further,
between
December
2007
and
the
end
of
2014,
Proctor
withdrew
approximately
$2.8
million
from
Atlas
bank
accounts
and
deposited
the
funds
with
two
entities
that
Proctor
personally
controlled.
Neither
company
provided
any
services
to
Atlas.
Proctor
falsely
described
the
transfers
as
administrative,
advisory,
and
management
fees,
or
bond
fees
and
advances.
38.
In
reality,
Proctor
spent
the
$2.8
million
that
he
transferred
to
these
two
entities
to
benefit
himself
and
his
family.
Proctor
used
the
funds
to
make
tuition
payments
for
his
children,
pay
down
his
mortgage
and
credit
card
bills,
and
generally
fund
his
lifestyle.
39.
During
the
period
from
2007
through
2014,
while
misusing
investor
funds,
Proctor
returned
approximately
$4.9
million
in
principal
to
investors
and
paid
approximately
$6.3
million
to
investors
in
purported
interest
to
maintain
the
appearance
that
the
investments
were
performing
as
represented.
CLAIMS
FOR
RELIEF
FIRST
CLAIM
Violations
of
Section
17(a)
of
the
Securities
Act
40.
The
Commission
realleges
and
incorporates
by
reference
each
and
every
allegation
in
paragraphs
1
through
39,
inclusive,
as
if
they
were
fully
set
forth
herein.
41.
By
engaging
in
the
conduct
described
above,
Defendants
Proctor
and
Atlas,

knowingly or
recklessly,
in
the offer or sale of securities,
directly or indirectly, by the use of any
means or
instruments of
transportation or communication in interstate commerce
or
by
use of
the mails:
a.
employed devices, schemes,
or artifices
to
defraud;
b.  obtained money
or property by means of an
untrue statement of a material fact
or
an omission of a
material fact necessary in order to make
the statements made, in
light of the circumstances
under which they were made, not
misleading; or
c.  engaged in transactions,
practices, or courses of business
which operated or would
operate as a fraud
or deceit upon the
purchaser.
42. By
engaging in the foregoing
conduct,
Defendants
Proctor and Atlas violated,
and
unless
enjoined will continue to violate,
Section 17(a) of the Securities Act [15 U.S.C.
§ ~~q~a)~
SECOND CLAIM
Violations of Section 10(b) of the
Exchange Act and Rule lOb-5
Thereunder
43. The
Commission realleges and incorporates by
reference each and every
allegation in paragraphs 1
through 42, inclusive, as if
they were fully set forth herein.
44. By
engaging in the conduct
described above, Defendants Proctor and Atlas,
knowingly
or recklessly, in connection with the
purchase or sale of securities, directly or
indirectly, by
the use of any means or instrumentalities
of interstate commerce, or the mails,
or
the facilities of a national securities
exchange:
a.  employed devices, schemes, or artifices
to defraud;
b.  made untrue statements
of material fact or omitted to
state material
facts
necessary in order to make the statements
made, in light of the circumstances
under which
they
were
made, not misleading; or

c.
engaged
in
acts,
practices,
or
courses
of
business
which
operated
or
would
operate
as
a
fraud
or
deceit
upon
any
person
in
connection
with
the
purchase
or
sale
of
any
security.
45.
By
engaging
in
the
foregoing
conduct,
Defendants
Proctor
and
Atlas
violated,
and
unless
enjoined
will
continue
to
violate,
Section
10(b)
of
the
Exchange
Act
[15
U.S.C.
§
78j(b)]
and
Rule
lOb
-5
thereunder
[17
C.F.R.
§
240.1Ob
-5].
judgment:
PRAYER
FOR
RELIEF
WHEREFORE,
the
Commission
respectfully
requests
that
the
Court
enter
a
final
I.
Permanently
restraining
and
enjoining
Defendants
Proctor
and
Atlas
from
violating
Section
17(a)
of
the
Securities
Act
[15
U.S.C.
§
77q(a)]
and
Section
10(b)
of
the
Exchange
Act
[15
U.S.C.
§
78j(b)]
and
Rule
lOb
-5
thereunder
[17
C.F.R.
§
240.1Ob
-5];
II.
Ordering
Defendants
Proctor
and
Atlas
to
disgorge
any
and
all
ill
-gotten
gains
derived
from
the
activities
set
forth
in
this
Complaint,
together
with
prejudgment
interest
thereon;
Ordering
Defendants
Proctor
and
Atlas
to
pay
civil
penalties
under
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)];
and
9

IV.
Granting
such
other
and
further
relief
as
this
Court
may
deem
just
and
appropriate.
Respectfully
submitted,
Date:
June
14,
2016
Sh
n
B.
Binger
G.
Jeffrey
Boujoukos
David
L.
Axelrod
Kelly
L.
Gibson
Julia
C.
Green
Assunta
Vivolo
SECURITIES
AND
EXCHANGE
COMMISSION
Philadelphia
Regional
Office
1617
JFK
Blvd.,
Suite
520
Philadelphia,
PA
19103
Telephone:
(215)
597
-3100
Facsimile:
(215)
597
-2740
greenju
@sec.gov
10

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

SECURITIES AND EXCHANGE
COMMISSION,

v.

ANDREW K. PROCTOR, and
ATLAS JG, LLC,

Plaintiff,

Defendants.

COMPLAINT

Civil Action No.

Jury Trial Demanded

Plaintiff Securities and Exchange Commission (the "Commission") alleges as follows:

SUMMARY

This matter involves an offering fraud conducted by Defendant Andrew K.

Proctor ("Proctor") and Defendant Atlas JG, LLC ("Atlas"), a Delaware limited liability

company formed by Proctor in 2006.

2. From 2007 through 2011, Proctor, through Atlas, raised more than $22 million

from at least 200 overseas investors through a fraudulent offering of purported bonds promising

annual returns of eight to nine percent.

3. Proctor induced investors to purchase these fraudulent securities by making

materially false and misleading statements and omissions concerning, among other things, the

use of investor funds.

4. Proctor told prospective investors that their funds would be used to purchase

receivables from homebuilding subcontractors at a discount, and that Atlas would profit from

Case 1:16-cv-00437-UNA   Document 1   Filed 06/14/16   Page 1 of 10 PageID #: 1



the difference between the discounted price and the amount ultimately collected from

homebuilders.

5. In actuality, Atlas used less than ten percent of the funds raised to buy receivables

from homebuilding subcontractors as promised, the last purchase occurring in 2008. However,

Proctor continued to fraudulently raise funds from investors for several years thereafter.

6. Contrary to what investors were told, Proctor used at least $11.2 million of

investor funds to make so-called "interest" and "principal" payments to investors. He used the

balance of the proceeds raised to, among other things, fund offshore investments in Asia,

speculate in stock options and other derivatives, and finance his lifestyle. Proctor took at least

$2.8 million to pay personal expenses, including his mortgage, his credit card bills, and his

children's tuition.

7. By knowingly or recklessly engaging in the conduct described in this Complaint,

Defendants Proctor and Atlas violated, and unless enjoined will continue to violate, 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 lOb-5

thereunder [17 C.F.R. § 240.1Ob-5].

JURISDICTION AND VENUE

The Commission brings this action pursuant to Sections 20(b) and 20(d) of the

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

U.S.C. § 78u(d)], to enjoin such acts, transactions, practices, and courses of business, and to

obtain disgorgement, prejudgment interest, civil penalties, and such other and further relief as

the Court may deem just and appropriate.

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

Case 1:16-cv-00437-UNA   Document 1   Filed 06/14/16   Page 2 of 10 PageID #: 2



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

Exchange Act [15 U.S.C. §§ 78u(d), 78u(e) and 78aa].

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

U.S.C. § 77v(a)] and Section 2'~ of the Exchange Act [15 U.S.C. § 78aa]. Among other things,

certain of the acts, transactions, practices, and courses of business constituting the violations

alleged herein occurred within the District of Delaware.

DEFENDANTS

11. Andrew K. Proctor, age 59, resides in Perris, California. Proctor is the founder

and sole managing member of Defendant Atlas. On January 11, 2005, Proctor pled guilty to

one count of conspiracy to commit wire fraud and securities fraud in the Central District of

California in connection with a penny stock pump-and-dump scheme and was sentenced to six

months of home detention, a $20,000 fine, and three years of probation. In addition, Proctor

was barred by the Commission from participating in the penny stock market.

12. Atlas JG, LLC is a Delaware limited liability company formed by Proctor in

2006. From 2007 through 2011, Atlas issued at least four series of purported bonds.

13. The Commission, Proctor and Atlas have agreed that the running of any statute of

limitations applicable to any action against Proctor and Atlas authorized, instituted or brought

by the Commission arising out of the Commission's investigation of the facts described herein,

including any sanctions or relief that may be imposed therein, has been tolled and suspended for

the period from November 1, 2014 through June 15, 2016.

FACTS

A. Formation of Atlas JG, LLC

14. During the real estate boom of the early 2000s, large U.S. homebuilders often

Case 1:16-cv-00437-UNA   Document 1   Filed 06/14/16   Page 3 of 10 PageID #: 3



took months to pay their subcontractors. Without a stream of payment, subcontractors could not

accept new work because they were unable to meet their cash needs.

15. In 2006, Proctor formed Atlas, purportedly to provide capital to subcontractors

while the subcontractors waited for builders to pay for the work they had performed.

16. At all relevant times, Atlas acted by and through Proctor.

17. Through a friend, Proctor was introduced to an individual in Hong Kong ("Hong

Kong Business Associate") who was a principal of a British Virgin Islands corporation that

purported to be in the business of natural resources trading and logistics. The Hong Kong

Business Associate assisted Proctor in marketing Atlas bonds to investors in Taiwan.

18. During the period from 2007 through 2011, Proctor issued at least four series of

purported bonds to over 200 overseas investors—all of whom appear to be located in Taiwan—

raising approximately $22.3 million.

19. Proctor engaged a registered transfer agent located in Delaware to serve as Atlas'

transfer agent, paying agent, and registrar.

20. To purchase the bonds, investors completed and signed subscription agreements,

which were sent to Proctor and countersigned by him in the U.S. on behalf of Atlas.

21. Investors wired their purchase payments directly to an Atlas escrow account held

at the transfer agent in Delaware. After an investment, purported interest and redemption

payments were sent to investors from this same Delaware account.

B. Material Misrepresentations And Omissions

22. Proctor drafted written offering documents that were used to solicit investors for

Atlas. The offering documents for each of the four bond series consisted of a bond purchase

agreement, a short six-page summary of the offering, and a subscription agreement.

4

Case 1:16-cv-00437-UNA   Document 1   Filed 06/14/16   Page 4 of 10 PageID #: 4



23. In the written offering documents, Proctor claimed that Atlas would make money

by purchasing receivables from homebuilding subcontractors at a discount: Atlas would

purchase a subcontractor's receivable due from the homebuilder, along with the attached lien

rights, for approximately 75-90% of the receivable. Proctor claimed that when the homebuilder

paid the subcontractor, the funds would be paid to Atlas, and Atlas' profit would be the 10-25%

difference between the amount it paid the subcontractor for the receivable and the amount paid

in full by the homebuilder to satisfy its obligation. Proctor claimed that investor returns would

be generated from these profits.

24. The offering documents for each of the four bond series contained the same

disclosures regarding the use of investor proceeds: "The proceeds of the Offering are to be used

to purchase receivables with lien rights due from national homebuilding companies from

[sub]contractors for completed work and materials supplied."

25. The offering documents stated that investors would receive eight to nine percent

annual interest paid quarterly and that the bonds would mature in five years (the first series on

December 31, 2012, the second on December 31, 2013, the third on December 31, 2014, and the

fourth on December 31, 2015).

26. The offering documents provided that investors could redeem prior to the

maturity date with 60 days written notice or, at maturity, Atlas would repay the principal

investment in full.

27. The offering documents also stated that Atlas could engage a placement agent and

pay a 1.25% fee to that placement agent.

C. Misuse of Investor Funds

28. Contrary to what investors were told, Proctor used more than 90% of investor

Case 1:16-cv-00437-UNA   Document 1   Filed 06/14/16   Page 5 of 10 PageID #: 5



funds for purposes other than the purchase of receivables from homebuilding subcontractors.

29. Between 2007 and 2011, Atlas used only $1.9 million of investor funds to

purchase homebuilding receivables, and all of those purchases occurred in 2007 and 2008.

30. In May 2008, Proctor used Atlas funds to enroll himself in a class on writing call

options—a highly risky form of derivatives trading.

31. Less than three weeks later, Proctor began purchasing stock options and other

derivatives with investor money.

32. Proctor moved investor funds through a web of shell companies and accounts that

made tracing and detection of his activities difficult.

33. From 2008 through 2011, Proctor funneled approximately $3.1 million from Atlas

bank accounts to two brokerage accounts in the name of Ocean Funding LLC, a Delaware

company that Proctor controlled. Proctor used this $3.1 million to speculate in the stock and

options market.

34. For example, from May 28 to July 25, 2008, Proctor executed several hundred

stock and options transactions, including in complex instruments such as calls, spreads, and

straddles. Proctor lost nearly $1 million on this trading alone.

35. From December 2007 through September 2011, Proctor also channeled over $7

million to his Hong Kong Business Associate's natural resources company. Of this amount,

approximately $2.7 million was purportedly for various coal shipping investments;

approximately $2.2 was purportedly for payment of "marketing fees;" and the remaining

balance of $2.1 million was purportedly for payment of various "agent deposit[s]," "collateral,"

and "advance[s]."

36. In addition, from January 2010 through July 2012, Proctor transferred more than

Case 1:16-cv-00437-UNA   Document 1   Filed 06/14/16   Page 6 of 10 PageID #: 6



$3 million to Commercial Acceptance LLC, a Delaware company that he controlled. The

majority of those funds were then purportedly used to finance coal trading activities in Asia.

For example, on January 10, 2011, Proctor wired $600,000 from an Atlas bank account to

Commercial Acceptance LLC. Two days later, Commercial Acceptance LLC wired $500,000

to the Hong Kong Business Associate's natural resources company referencing "Indonesian

Coal Trade."

37. Further, between December 2007 and the end of 2014, Proctor withdrew

approximately $2.8 million from Atlas bank accounts and deposited the funds with two entities

that Proctor personally controlled. Neither company provided any services to Atlas. Proctor

falsely described the transfers as administrative, advisory, and management fees, or bond fees

and advances.

38. In reality, Proctor spent the $2.8 million that he transferred to these two entities to

benefit himself and his family. Proctor used the funds to make tuition payments for his

children, pay down his mortgage and credit card bills, and generally fund his lifestyle.

39. During the period from 2007 through 2014, while misusing investor funds,

Proctor returned approximately $4.9 million in principal to investors and paid approximately

$6.3 million to investors in purported interest to maintain the appearance that the investments

were performing as represented.

CLAIMS FOR RELIEF

FIRST CLAIM
Violations of Section 17(a) of the Securities Act

40. The Commission realleges and incorporates by reference each and every

allegation in paragraphs 1 through 39, inclusive, as if they were fully set forth herein.

41. By engaging in the conduct described above, Defendants Proctor and Atlas,

Case 1:16-cv-00437-UNA   Document 1   Filed 06/14/16   Page 7 of 10 PageID #: 7



knowingly or recklessly, in the offer or sale of securities, directly or indirectly, by the use of any

means or instruments of transportation or communication in interstate commerce or by use of

the mails:

a. employed devices, schemes, or artifices to defraud;

b. obtained money or property by means of an untrue statement of a material fact or

an omission of a material fact necessary in order to make the statements made, in

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

c. engaged in transactions, practices, or courses of business which operated or would

operate as a fraud or deceit upon the purchaser.

42. By engaging in the foregoing conduct, Defendants Proctor and Atlas violated, and

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

§ ~~q~a)~

SECOND CLAIM
Violations of Section 10(b) of the Exchange Act and Rule lOb-5 Thereunder

43. The Commission realleges and incorporates by reference each and every

allegation in paragraphs 1 through 42, inclusive, as if they were fully set forth herein.

44. By engaging in the conduct described above, Defendants Proctor and Atlas,

knowingly or recklessly, in connection with the purchase or sale of securities, directly or

indirectly, by the use of any means or instrumentalities of interstate commerce, or the mails, or

the facilities of a national securities exchange:

a. employed devices, schemes, or artifices to defraud;

b. made untrue statements of material fact or omitted to state material facts

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

under which they were made, not misleading; or

Case 1:16-cv-00437-UNA   Document 1   Filed 06/14/16   Page 8 of 10 PageID #: 8



c. engaged in acts, practices, or courses of business which operated or would operate

as a fraud or deceit upon any person in connection with the purchase or sale of

any security.

45. By engaging in the foregoing conduct, Defendants Proctor and Atlas violated, and

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

and Rule lOb-5 thereunder [17 C.F.R. § 240.1Ob-5].

judgment:

PRAYER FOR RELIEF

WHEREFORE, the Commission respectfully requests that the Court enter a final

I.

Permanently restraining and enjoining Defendants Proctor and Atlas from violating

Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)] and Section 10(b) of the Exchange Act

[15 U.S.C. § 78j(b)] and Rule lOb-5 thereunder [17 C.F.R. § 240.1Ob-5];

II.

Ordering Defendants Proctor and Atlas to disgorge any and all ill-gotten gains derived

from the activities set forth in this Complaint, together with prejudgment interest thereon;

Ordering Defendants Proctor and Atlas to pay civil penalties under 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)];

and

9

Case 1:16-cv-00437-UNA   Document 1   Filed 06/14/16   Page 9 of 10 PageID #: 9



IV.

Granting such other and further relief as this Court may deem just and appropriate.

Respectfully submitted,

Date: June 14, 2016 Sh n B. Binger
G. Jeffrey Boujoukos
David L. Axelrod
Kelly L. Gibson
Julia C. Green
Assunta Vivolo

SECURITIES AND EXCHANGE COMMISSION
Philadelphia Regional Office
1617 JFK Blvd., Suite 520
Philadelphia, PA 19103
Telephone: (215) 597-3100
Facsimile: (215) 597-2740
[email protected]

10

Case 1:16-cv-00437-UNA   Document 1   Filed 06/14/16   Page 10 of 10 PageID #: 10