SEC v. JOSEPH ANDREW PAUL; JOHN D. ELLIS, JR.; JAMES S. QUAY; and DONALD H. ELLISON, No. 2:16-cv-01326, Eastern District of Pennsylvania (Apr. 4, 2016) — Complaint

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.
JOSEPH ANDREW PAUL,
JOHN D. ELLIS, JR.,
JAMES S. QUAY,
a/k/a "STEPHEN JAMESON," and
DONALD H. ELLISON
Defendants
Civil Action No.
Jury Trial Demanded
COMPLAINT
Plaintiff Securities and Exchange Commission (''the Commission") alleges:
SUMMARY
OF THE ACTION
1. From 20 IO through at least December 2012, defendants Joseph Andrew Paul and
John
D. Ellis, Jr. orchestrated a fraudulent scheme in which they raised more than $3.9 million
from more than a dozen investors through their jointly owned investment advisory firm, Paul-
Ellis Investment Associates LLC ("PEIA").
2. In a variety
of different offering materials, Paul and Ellis provided prospective
clients with false and wholly fabricated information that misrepresented, among other things,
PEIA' s investment strategies, assets under management, and investment performance.
3. For example, Paul and Ellis falsely claimed that PEIA managed as much as $164
million in client assets and that its investment strategies generated annual returns ranging from
8.5% to more than 56%.
In reality, PEIA never managed more than $4 million and these
purported returns grossly exceeded any actual returns PEIA generated, and were simply made up
by Paul and Ellis.
4. In furtherance
of the scheme, Paul and Ellis recruited defendants James S. Quay

and Donald H. Ellison to solicit investors for PEIA through Aptus Planning LLC, a firm owned
by Quay and Ellison which purportedly provided financial planning for senior citizens.
5. At the time Quay started marketing PEIA, he was a convicted felon and a
disbarred attorney. During the course
of marketing PEIA, Quay was enjoined from violating the
securities laws after being sued by the Commission for engaging in a separate securities fraud.
In order to conceal Quay's true identity from potential investors, Quay and Ellison
misrepresented Quay as an attorney, "Stephen Jameson." Using this fictitious name, Quay and
Ellison were able to raise nearly $1.3 million from investors for PEIA.
6. Paul and Ellis initially invested some of the funds they, and Quay and Ellison,
fraudulently raised for PEIA. However, during the later stages
of the fraud, Paul and Ellis
ceased investing these monies and misappropriated the remaining funds, spending thousands
of
dollars to pay legal bills, employee salaries, and personal expenses. They also diverted $385,900
to Quay, who used the funds for his own personal trading. As a result
of the fraudulent conduct
by Paul, Ellis, Quay, and Ellison, PEIA investors lost more than $1.9 million.
7. As a result
of the conduct described in this Complaint, Paul, Ellis, Quay, and
Ellison have violated, and unless restrained and enjoined will continue to violate, Section l 7(a)
of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77q(a)]; Section lO(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.lOb-5]; and Sections 206(1) and 206(2) of the Investment Advisers
Act
of 1940 ("Advisers Act") [15 U.S.C. §§ 80b-6(1) and 80b-6(2)]. Additionally, Ellis has
violated, and unless restrained and enjoined will continue to violate, Section 207
of the Advisers
Act [15 U.S.C. § 80b-7].
8. As a result of the conduct described in this Complaint, Paul and Ellis have aided
and abetted PEIA's violations
of Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and
Rule 206(4)-l(a)(5) thereunder [17 C.F.R. 275.206(4)-l(a)(5)].
JURISDICTION AND VENUE
9. The Commission brings this action pursuant to Sections 20(b) and 20(d)
of the
2

Securities Act [15 U.S.C. §§ 77t(b) and 77t(d)], Section 2l(d) and (e) of the Exchange Act [15
U.S.C.
§§ 78u(d) and 78u(e)], and Sections 209(d) and 209(e) of the Advisers Act [15 U.S.C. §§
80b-9(d) and 80b-9(e)] to enjoin such acts, practices, and courses of business, and to obtain
disgorgement, prejudgment interest, civil money penalties, and such other and further relief as
the Court may deem
just and appropriate.
10. This Court has jurisdiction over this action pursuant to Sections
21 ( d), 21 ( e  ),  and
27
of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa], Sections 20(b), 20(d), and 22(a)
of the Securities Act [15 U.S.C. §§ 77t(b), 77t(d), and 77v(a)], and Sections 209(d), 209(e), and
Section 214
of the Advisers Act [15 U.S.C. §§ 80b-9(d), 80b-9(e), and 80b-14].
11. Venue in this District is proper pursuant to Section 27
of the Exchange Act [ 15
U.S.C. § 78aa], Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)], and Section 214 of the
Advisers Act [15 U.S.C.
§ 80b-14] because certain of the acts, practices, and courses of business
constituting the violations alleged herein occurred within the Eastern District
of Pennsylvania.
Defendants Paul and Ellis also reside within the Eastern District
of Pennsylvania.
DEFENDANTS
12. Joseph Andrew Paul, age 39, is a resident of Philadelphia, Pennsylvania and co-
founder
of PEIA. Prior to co-founding PEIA, Paul held Series 6, 7, and 66 licenses and was a
registered representative associated with various firms.
13. John D. Ellis, Jr., age 43, is a resident
of Philadelphia, Pennsylvania and co-
founder
of PEIA. Prior to co-founding PEIA, Ellis held Series 7, 31, 63, and 65 licenses and was
a registered representative associated with various firms.
14. James
S. Quay, a/k/a "Stephen Jameson," age 55, is a resident of Atlanta, Georgia
and co-founder
of Aptus Planning LLC. In 2005, Quay, an attorney, was convicted of tax fraud
and subsequently disbarred. In 2012, the Commission sued Quay, alleging that Quay engaged in
securities fraud by misappropriating investor funds and aiding and abetting two other fraudulent
schemes halted
by a Commission enforcement action. Subsequently, Quay was enjoined from
violating the securities laws and ordered to pay $2,032,757 in disgorgement, interest, and
3

penalties. After a hearing on September 28, 2015, Quay was found guilty of criminal contempt
and ordered jailed for ten days for providing false testimony in relation to his failure to pay these
morues.
15. Donald H. Ellison, age 64, is a resident
of Palm Bay, Florida and co-founder of
Aptus Planning LLC. Prior to co-founding Aptus Planning LLC, Ellison was a registered
representative associated with numerous securities firms. Ellison has held Series 7, 24, 53 and
63 licenses.
RELEVANT ENTITIES
16. Paul-Ellis Investment Associates LLC is a Pennsylvania limited liability company
co-founded
by Ellis and Paul. On July 27, 2009, PEIA registered with the Commission as an
investment adviser under Rule 203A-2( d), thereby representing that the firm expected to have
$25 million in assets under management within 120 days. Between December 2009 and October
2011, PEIA filed twelve amended Forms ADV, each
of which stated that PEIA managed $30
million
in assets. On November 9, 2011, PEIA filed an amended Form ADV for the last time,
and claimed to have only $15 million in assets under management. On January 8, 2016, the
Commission issued an order cancelling PEIA' s registration, having found that PEIA was not in
existence, was not engaged in the investment adviser business, or was prohibited from
registration as an investment adviser under Section 203A
of the Advisers Act.
17. Summit Trust Company ("Summit") is a Nevada-chartered trust company with its
principal place
of business in Las Vegas, Nevada, and a marketing office in Colmar,
Pennsylvania. Kevin Brown and George Brown purchased Summit in 2004. Summit
purportedly provided trust administration, estate planning, charitable giving, gift administration,
and custodial services. In 2015, the Commission filed a lawsuit alleging that Summit, its
owners, and others had defrauded Summit's clients.
See SEC v. Summit Trust Co., et al., No. 15-
cv-5843 (E.D. Pa. Oct. 27, 2015). The defendants in that case were ordered to pay
disgorgement, penalties, and prejudgment interest, and were enjoined from further violations
of
the securities laws.
4

18. Aptus Planning LLC ("Aptus") was a Florida limited liability company, with its
principal place
of business in Tampa, Florida, founded and operated by Quay and Ellison.
Through Aptus, Quay and Ellison purportedly provided estate planning services and marketed
life settlements and fixed annuity insurance products, among others.
In September 2013, the
Florida Department
of State dissolved Aptus for failing to file its annual report.
FACTS
A. Paul and Ellis Create and Distribute Fraudulent Offering Materials
19. From 2010 through at least November 2012, Paul and Ellis orchestrated a
fraudulent scheme in which they falsely marketed themselves as experienced money managers
with a highly successful track record
of investing in exchange-traded funds ("ETFs") through
their jointly owned, registered investment adviser, PEIA.
20. During this period, Paul and Ellis created a variety
of offering materials to solicit
investor funds, including a 67-page PEIA prospectus, marketing brochures, PowerPoint
presentations, and a PEIA website (collectively referred to as "PEIA Offering Materials").
21. The PEIA Offering Materials contained misrepresentations about PEIA' s
investment strategy, assets under management, and investment performance, including:
(a) Charts depicting wholly fabricated annual returns for each
of PEIA's
investment strategies, ranging from
8.51 % to 56.24%;
(b) Claims that Paul and Ellis had extensive experience generating these high
returns through PEIA' s proprietary investment strategies; and
( c) Claims that PEIA had between $150 million to $164 million in "assets
under advisement" when, in reality, Paul and Ellis never managed more
than $4 million dollars.
22. Each
of these claims was false. Paul and Ellis copied most of the information
relating to the investment strategies from the website
of another registered investment adviser,
5

and "cut and pasted" the performance numbers from other sources into the PEIA Offering
Materials.
23. To solicit investor funds, Paul and Ellis distributed the fraudulent PEIA Offering
Materials to numerous registered advisers, broker-dealers, and financial planning firms.
24. Between December 2009 and November 2011, Ellis filed several Forms ADV for
PEIA with the Commission that also grossly overstated PEIA's assets under management.
B. Paul and Ellis Make Material Misstatements in Soliciting Summit's
Investment in PEIA
25. In mid-September 2010, officers of Summit met with Paul and Ellis to discuss
retaining PEIA as an investment adviser.
26. During the meeting, Paul and Ellis used a PowerPoint presentation containing
misrepresentations regarding, among other things, PEIA' s assets under management and
historical performance. For example, the PowerPoint presentation stated that PEIA had $150
million
iii "assets under advisement," and contained a table purporting to show that PEIA's
"Strategic Growth Portfolio" generated average annual returns of25.13% between 2000 and
2009.
27. Summit retained PEIA as its investment adviser and began to invest in PEIA' s
"Strategic Growth Portfolio." PEIA and Summit entered into an advisory agreement whereby
PEIA agreed to manage Summit's invested funds for a fee.
28. In December 2010, Summit officers again met with Paul and Ellis to discuss
investing additional funds in PEIA. At this meeting, Paul and Ellis recommended PEIA' s
"Quantitative Portfolio." Paul and Ellis provided the Summit officers with a Power Point
presentation falsely stating that the Quantitative Portfolio had generated annual returns from 36%
to 107% between 2008 and 2010.
29. Summit thereafter invested additional sums with PEIA, with its final investment
made on April
1, 2011.
6

30. Through their misrepresentations regarding PEIA, Paul and Ellis obtained a total
of approximately $2,672,573 from Summit. Paul and Ellis invested, and ultimately lost much of
Summit's investment. By November 2, 2011, when Summit withdrew the last of its funds from
PEIA, it had suffered losses
of approximately $744,330, or about 28% percent of its principal
investment. Paul and Ellis also charged Summit nearly $9,000 in advisory fees.
31.
In 2012, Summit filed a lawsuit against Paul, Ellis, and PEIA, alleging, among
other claims, violations
of Section lO(b) of the Exchange Act and Rule lOb-5 thereunder, arising
in part from misrepresentations Paul and Ellis made to Summit in
S<?liciting Summit's investment
with PEIA.
See Summit Trust Co. v. Paul Ellis Investment Associates, LLC, et al., No. 12-cv-
6672 (E.D. Pa. Nov. 29, 2012).
On August 2, 2013, the court entered a default judgment against
Paul, Ellis, and PEIA in the amount
of $761,426.16 and concluded that they had violated the
securities laws.
C. Paul, Ellis, Quay, and Ellison Make Material Misstatements In Soliciting
Aptus Clients to Invest in PEIA
32. In 2011, Paul and Ellis began marketing PEIA to Quay and Ellison, the co-owners
of Aptus, a firm that purportedly provided financial planning for senior citizens. Paul and Ellis
sought to have Quay and Ellison recommend
PEIA's "Volatility Arbitrage Portfolio" ("V AP")
strategy to Aptus' clients and prospective clients.
33. Paul and Ellis provided Quay and Ellison with a four-page marketing brochure
entitled "Aptus Planning Portfolios: Volatility Arbitrage Portfolio" (the
"V AP Brochure"), which
described the V AP as a conservative investment strategy that involved risking only 10% of an
investor's principal investment. The V AP Brochure falsely stated that between 2008 and July
2011, PEIA used this strategy to generate average annual returns
of 46.70%.
34. Paul and Ellis began marketing the V AP strategy in mid-2011 and created the
V
AP Brochure so that Quay and Ellison could use it to market PEIA' s investment advisory
services to their current and prospective clients. Neither Quay nor Ellison did any due diligence
regarding the claims in the V
AP Brochure or into PEIA.
7

35. Subsequently, Quay and Ellison began soliciting potential investors for PEIA by
hosting free dinner seminars arranged at a restaurant in the Tampa area. Many
of the attendees
were senior citizens who Quay and Ellison targeted through mass mailings.
36. At such seminars, Ellison introduced Quay, and Quay referred to himself, as
attorney "Stephen Jameson." Quay and Ellison also distributed documents to prospective
investors listing Jameson and Ellison as directors
of Aptus. At no time did Quay and Ellison tell
prospective investors that Jameson was not Quay's real name. Quay and Ellison concealed
Quay's real name and instead used a fictitious name to prevent prospective investors from
researching Quay's background and discovering his tax fraud conviction and disbarment.
37. Following each dinner presentation, Quay and Ellison invited prospective
investors to schedule individual consultations at Aptus' office to discuss their financial planning
needs. During these individual consultations, while continuing to conceal Quay's identity, Quay
and Ellison used the V AP Brochure to promote PEIA' s Volatility Arbitrage Portfolio and touted
Paul's and Ellis' experience as successful money managers. Paul and Ellis attended at least one
of these consultations.
38. On at least one occasion, Quay provided an investor with a proposal that Quay
authored that contained additional false claims about PEIA's Volatility Arbitrage Portfolio,
including that PEIA' s options trading strategy: "will
[p ]rovide double digit returns with
extremely low risk;" "[e]xposes less
than 5% of your portfolio to market risk;" and was
"averaging triple digit returns."
39. Fourteen investors solicited by Quay and Ellison invested a total
of approximately
$1,295,000 with PEIA. These "Aptus investors" typically agreed that PEIA would receive as
compensation 50%
of their monthly returns. Paul and Ellis, in tum, agreed to share 65% of their
fees with Quay and Ellison.
D. Paul and Ellis Steal the Aptus Investors' Money
40. Between July 2011 and February 2012, the Aptus investors collectively wired
nearly $1.3 million to a PEIA bank account at Bank A controlled by Ellis.
8

41. Ellis then transferred approximately two-thirds of the approximately $1.3 million
to a PEIA brokerage account. From July 2011 through February 2012, Paul and Ellis invested
the funds
in the PEIA brokerage account in various securities, including ETFs and ETF options.
However, Paul and Ellis did not invest the remaining one-third
of the Aptus investor funds,
approximately $450,000, instead using some
of this money to pay various personal and business
expenses. For example, between July 2011 and February 2012, Ellis wired more than $68,000 to
an Aptus account controlled
by Quay. And Ellis paid over $50,000 to two Philadelphia law
firms, $47,000 in apparent compensation to Paul, Ellis, and one other PEIA employee, and spent
thousands
of dollars in ATM withdrawals and debit card purchases for personal expenses.
42. By April 2012, Paul and Ellis had spent nearly $190,000 of the approximately
$450,000 in Aptus investor funds that they did not invest as promised. These expenditures also
far exceeded any performance fees to which Paul, Ellis, Quay,
or Ellison possibly could have
been entitled.
43.
In April 2012, the brokerage firm holding PEIA's brokerage accounts closed
PEIA' s accounts because
of concerns about money laundering. Thereafter, Ellis wired the
remaining balance
of the Aptus investor money, approximately $635,000, to a PEIA bank
account at Bank B.
44.
By the end of May 2012, Paul and Ellis combined PEIA's remaining Aptus
investor funds, totaling more than $895,000, in PEIA's Bank B bank account. Paul and Ellis
never invested the funds again. Instead, between May 2012 and November 2012, Paul and Ellis
used these funds to pay business and other personal expenses, including: over $55,000 in
multiple wire payments to Quay and Ellison; $68,500 in PEIA salary payments; thousands
of
dollars in transfers to various third parties; and numerous cash and debit card withdrawals.
E. Quay's Unauthorized Trading and Material Misrepresentations
45. On May 17, 2012, Ellis wired $385,900 to a bank account controlled by Quay,
who at the time had two outstanding margin calls totaling $192,910
in a brokerage account he
9

controlled. Quay immediately transferred the $385,900 into the brokerage account (satisfying
the margin calls), and used the Aptus investor funds to trade in Apple securities.
By July 12,
2012, the Aptus investor funds were gone.
46. After Quay already had suffered significant trading losses, he told a few
of the
Aptus investors that he had invested a portion
of their funds in his "option credit spread
strategy." Quay lied to these investors about the performance
of this investment, claiming that
he was generating positive returns when, in reality, the remaining funds had already been lost.
For example, on July 20, 2012, Quay wrote to an investor claiming his investment strategy was
"performing as expected in the 2-4% weekly range," and signing the letter "Steve."
In a letter
dated October 18, 2012 and signed by Aptus Planning LLC, Quay wrote, "[w]e expect solid
continued growth throughout the remainder
of the year from our Apple credit spread strategy."
One Aptus investor redeemed his entire investment early in the scheme, and another redeemed
less than I 0%
of the funds she invested. The remaining Aptus investors lost their entire
investment with PEIA.
FIRST CLAIM FOR RELIEF
Violations of Section l 7(a) of the Securities Act By
Paul, Ellis, Quay, and Ellison
4 7. The Commission realleges and incorporates by reference each and every
allegation in paragraphs I through 46, inclusive, as
if they were fully set forth herein.
48.
By engaging in the conduct described above, Defendants Paul, Ellis, Quay, and
Ellison knowingly
or recklessly, in the offer or sale of securities, directly or indirectly, by the use
of 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 untrue statements of material fact
10

or omissions to state material facts necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading; and/or
( c) engaged in transactions, practices, or courses
of business which operated
or would operate as a fraud
or deceit upon purchasers of securities.
49.
By engaging in the foregoing conduct, Defendants Paul, Ellis, Quay, and Ellison
violated and, unless enjoined, will continue to violate Section l 7(a)
of the Securities Act [15
U.S.C.
§ 77q(a)].
SECOND CLAIM FOR RELIEF
Violations of Section lO(b) of the Exchange Act and Rule lOb-5 Thereunder By
Paul, Ellis, Quay,
and Ellison
50. The Commission realleges and incorporates by reference each and every
allegation in paragraphs 1 through 46, inclusive, as
if they were fully set forth herein.
51.
By engaging in the conduct described above, Defendants Paul, Ellis, Quay, and
Ellison knowingly
or recklessly, in connection with the purchase or sale of securities, directly or
indirectly, by use
of the means or instrumentalities of interstate commerce or of the mails or of
any facility 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; and/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.
52.
By engaging in the foregoing conduct, Defendants Paul, Ellis, Quay, and Ellison
violated and, unless enjoined, will continue to violate Section lO(b)
of the Exchange Act [15
U.S.C.
§ 78j(b)] and Rule lOb-5 thereunder [17 C.F.R. § 240.lOb-5].
11

THIRD CLAIM FOR RELIEF
Violations of Section 206(1) and 206(2) of the Advisers Act By
Paul, Ellis, Quay, and Ellison
53. The Commission realleges and incorporates by reference each and every
allegation in paragraphs 1 through 46, inclusive, as
if they were fully set forth herein.
54. By engaging in the conduct described above, Defendants Paul, Ellis, Quay, and
Ellison, while acting as investment advisers, by the use
of the means and instrumentalities of
interstate commerce and of the mails, directly or indirectly, knowingly or recklessly have
employed and are employing devices, schemes, and artifices to defraud their clients and
prospective clients; and have engaged and are engaging in transactions, practices, and courses
of
business which operate as a fraud or deceit upon their clients and prospective clients.
55. By engaging in the foregoing conduct, Defendants Paul, Ellis, Quay, and Ellison
have violated, and unless restrained will continue to violate, Sections 206(1) and 206(2)
of the
Advisers Act
[15 U.S.C. §§ 80b-6(1) and 80b-6(2)].
FOURTH CLAIM FOR RELIEF
Violations of Section 207 By Ellis
56. The Commission realleges and incorporates by reference each and every
allegation in paragraphs 1 through 46, inclusive, as
if they were fully set forth herein.
57. By engaging in the conduct described above, Defendant Ellis willfully made
untrue statements
of material fact in registration applications and/or reports filed with the
Commission, or willfully omitted to state material facts required to be stated therein.
58. By engaging in the foregoing conduct, Defendant Ellis violated, and unless
restrained will continue to violate, Section 207
of the Advisers Act [15 U.S.C. § 80b-7].
FIFTH CLAIM FOR RELIEF
Aiding and Abetting PEIA's Violations of Section 206(4)
and Rule 206( 4)-l{a)(Sl Thereunder By Paul and Ellis
59. The Commission realleges and incorporates by reference each and every
12

allegation in paragraphs 1 through 46, inclusive, as if they were fully set forth herein.
60.
By engaging in the conduct described above, PEIA, while it was a registered as
and acting as
an investment adviser, by the use of the means and instrumentalities of interstate
commerce and
of the mails, directly and indirectly, knowingly or recklessly engaged in acts,
practices,
or courses of business that were fraudulent, deceptive or manipulative with respect to
investors and potential investors, specifically, PEIA directly
or indirectly, published, circulated,
or distributed advertisements which contained untrue statements of a material fact and/or which
were otherwise false
or misleading.
61.
By engaging in the foregoing conduct, PEIA violated Section 206(4) of the
Advisers
Act [15 U.S.C. § 80b-6( 4)] and Rule 206( 4)-1 (A)(5) thereunder [17 C.F .R. 275.206( 4)­
l (a)(5)].
62. Paul and Ellis were the principals
of PEIA. Paul and Ellis owned and controlled
PEIA and were generally aware
of PEIA' s activities.
63.
By engaging in the conduct described above, Paul and Ellis knowingly or
recklessly provided substantial assistance to PEIA in its publication, circulation, or distribution
of advertisements which contained untrue statements of a material fact and/or which were
otherwise false
or misleading.
64.
By engaging in the foregoing conduct, Paul and Ellis aided and abetted PEIA's
violations of Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 206(4)-l(a)(5)
thereunder [17 C.F.R. 275.206(4)-l(a)(5)].
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that this Court enter a final
judgment:
I.
Permanently restraining and enjoining Defendants Paul, Ellis, Quay, and Ellison from
violating Section 17(a)
of the Securities Act [15 U.S.C. § 77q(a)];
13

II.
Permanently restraining and enjoining Defendants Paul, Ellis, Quay, and Ellison from
violating Section lO(b)
of the Exchange Act [15 U.S.C. § 78j(b)], and Rule lOb-5 thereunder [17
C.F.R.
§ 240.lOb-5];
III.
Permanently restraining and enjoining Defendants Paul, Ellis, Quay, and Ellison from
violating Sections 206(1) and 206(2)
of the Advisers Act [15 U.S.C. §§ 80b-6(1) and 80b-6(2)];
IV.
Permanently restraining and enjoining Defendant Ellis from violating Section 207 of the
Advisers Act [15 U.S.C.
§ 80b-7];
v.
Permanently restraining and enjoining Defendants Paul and Ellis from aiding and
abetting any violation
of Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and Rule
206(4)-l(a)(5) thereunder [17 C.F.R. 275.206(4)-l(a)(5)] by knowingly or recklessly providing
substantial assistance to an investment adviser that publishes, circulates,
or distributes
advertisements which contain untrue statements
of a material fact and/or which are otherwise
false or misleading;
VI.
Ordering Defendants Paul, Ellis, Quay, and Ellison to disgorge any and all ill-gotten
gains, together with prejudgment interest, derived from the activities set forth in this Complaint;
VII.
Ordering Defendants Paul, Ellis, Quay, and Ellison to pay civil penalties pursuant to
Section 21(d)(3)
of the Exchange Act [15 U.S.C. §§ 78u(d)(3)], Section 20(d) of the Securities
Act [15 U.S.C.
§§ 77t(d)], and Section 209(e) of the Advisers Act [15 U.S.C. § 80b-9(e)]; and
VIII.
Granting such other and further relief as this Court may determine to be just and
necessary.
14

Dated: April  1, 2016
Respectfully submitted,
G. Jeffrey Boujoukos (PA 67215)
David
L. Axelrod
Brendan P. McGlynn
Mark R. Sylvester
Lisa M. Candera
Attorneys fo r Plaintiff:
SECURITIES AND EXCHANGE COMMISSION
16 17 JFK Blvd., Suite 520
Philadelphia, PA 19103
Telephone: (2 15) 597-3100
Facsimile: (215) 597-2740
15

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

SECURITIES AND EXCHANGE 
COMMISSION, 

Plaintiff, 

v. 

JOSEPH ANDREW PAUL, 
JOHN D. ELLIS, JR., 
JAMES S. QUAY, 

a/k/a "STEPHEN JAMESON," and 
DONALD H. ELLISON 

Defendants 

Civil Action No. 

Jury Trial Demanded 

COMPLAINT 

Plaintiff Securities and Exchange Commission (''the Commission") alleges: 

SUMMARY OF THE ACTION 

1. From 20 IO through at least December 2012, defendants Joseph Andrew Paul and 

John D. Ellis, Jr. orchestrated a fraudulent scheme in which they raised more than $3.9 million 

from more than a dozen investors through their jointly owned investment advisory firm, Paul-

Ellis Investment Associates LLC ("PEIA"). 

2. In a variety of different offering materials, Paul and Ellis provided prospective 

clients with false and wholly fabricated information that misrepresented, among other things, 

PEIA' s investment strategies, assets under management, and investment performance. 

3. For example, Paul and Ellis falsely claimed that PEIA managed as much as $164 

million in client assets and that its investment strategies generated annual returns ranging from 

8.5% to more than 56%. In reality, PEIA never managed more than $4 million and these 

purported returns grossly exceeded any actual returns PEIA generated, and were simply made up 

by Paul and Ellis. 

4. In furtherance of the scheme, Paul and Ellis recruited defendants James S. Quay 

Case 2:16-cv-01326-CMR Document 1 Filed 04/01/16 Page 1 of 15 



   

and Donald H. Ellison to solicit investors for PEIA through Aptus Planning LLC, a firm owned 

by Quay and Ellison which purportedly provided financial planning for senior citizens. 

5. At the time Quay started marketing PEIA, he was a convicted felon and a 

disbarred attorney. During the course of marketing PEIA, Quay was enjoined from violating the 

securities laws after being sued by the Commission for engaging in a separate securities fraud. 

In order to conceal Quay's true identity from potential investors, Quay and Ellison 

misrepresented Quay as an attorney, "Stephen Jameson." Using this fictitious name, Quay and 

Ellison were able to raise nearly $1.3 million from investors for PEIA. 

6. Paul and Ellis initially invested some of the funds they, and Quay and Ellison, 

fraudulently raised for PEIA. However, during the later stages of the fraud, Paul and Ellis 

ceased investing these monies and misappropriated the remaining funds, spending thousands of 

dollars to pay legal bills, employee salaries, and personal expenses. They also diverted $385,900 

to Quay, who used the funds for his own personal trading. As a result of the fraudulent conduct 

by Paul, Ellis, Quay, and Ellison, PEIA investors lost more than $1.9 million. 

7. As a result of the conduct described in this Complaint, Paul, Ellis, Quay, and 

Ellison have violated, and unless restrained and enjoined will continue to violate, Section l 7(a) 

of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77q(a)]; Section lO(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.lOb-5]; and Sections 206(1) and 206(2) of the Investment Advisers 

Act of 1940 ("Advisers Act") [15 U.S.C. §§ 80b-6(1) and 80b-6(2)]. Additionally, Ellis has 

violated, and unless restrained and enjoined will continue to violate, Section 207 of the Advisers 

Act [15 U.S.C. § 80b-7]. 

8. As a result of the conduct described in this Complaint, Paul and Ellis have aided 

and abetted PEIA's violations of Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and 

Rule 206(4)-l(a)(5) thereunder [17 C.F.R. 275.206(4)-l(a)(5)]. 

JURISDICTION AND VENUE 

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

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Securities Act [15 U.S.C. §§ 77t(b) and 77t(d)], Section 2l(d) and (e) of the Exchange Act [15 

U.S.C. §§ 78u(d) and 78u(e)], and Sections 209(d) and 209(e) of the Advisers Act [15 U.S.C. §§ 

80b-9(d) and 80b-9(e)] to enjoin such acts, practices, and courses of business, and to obtain 

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

the Court may deem just and appropriate. 

10. This Court has jurisdiction over this action pursuant to Sections 21 ( d), 21 ( e ), and 

27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa], Sections 20(b), 20(d), and 22(a) 

of the Securities Act [15 U.S.C. §§ 77t(b), 77t(d), and 77v(a)], and Sections 209(d), 209(e), and 

Section 214 of the Advisers Act [15 U.S.C. §§ 80b-9(d), 80b-9(e), and 80b-14]. 

11. Venue in this District is proper pursuant to Section 27 of the Exchange Act [ 15 

U.S.C. § 78aa], Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)], and Section 214 of the 

Advisers Act [15 U.S.C. § 80b-14] because certain of the acts, practices, and courses of business 

constituting the violations alleged herein occurred within the Eastern District of Pennsylvania. 

Defendants Paul and Ellis also reside within the Eastern District of Pennsylvania. 

DEFENDANTS 

12. Joseph Andrew Paul, age 39, is a resident of Philadelphia, Pennsylvania and co-

founder of PEIA. Prior to co-founding PEIA, Paul held Series 6, 7, and 66 licenses and was a 

registered representative associated with various firms. 

13. John D. Ellis, Jr., age 43, is a resident of Philadelphia, Pennsylvania and co-

founder of PEIA. Prior to co-founding PEIA, Ellis held Series 7, 31, 63, and 65 licenses and was 

a registered representative associated with various firms. 

14. James S. Quay, a/k/a "Stephen Jameson," age 55, is a resident of Atlanta, Georgia 

and co-founder of Aptus Planning LLC. In 2005, Quay, an attorney, was convicted of tax fraud 

and subsequently disbarred. In 2012, the Commission sued Quay, alleging that Quay engaged in 

securities fraud by misappropriating investor funds and aiding and abetting two other fraudulent 

schemes halted by a Commission enforcement action. Subsequently, Quay was enjoined from 

violating the securities laws and ordered to pay $2,032,757 in disgorgement, interest, and 

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penalties. After a hearing on September 28, 2015, Quay was found guilty of criminal contempt 

and ordered jailed for ten days for providing false testimony in relation to his failure to pay these 

morues. 

15. Donald H. Ellison, age 64, is a resident of Palm Bay, Florida and co-founder of 

Aptus Planning LLC. Prior to co-founding Aptus Planning LLC, Ellison was a registered 

representative associated with numerous securities firms. Ellison has held Series 7, 24, 53 and 

63 licenses. 

RELEVANT ENTITIES 

16. Paul-Ellis Investment Associates LLC is a Pennsylvania limited liability company 

co-founded by Ellis and Paul. On July 27, 2009, PEIA registered with the Commission as an 

investment adviser under Rule 203A-2( d), thereby representing that the firm expected to have 

$25 million in assets under management within 120 days. Between December 2009 and October 

2011, PEIA filed twelve amended Forms ADV, each of which stated that PEIA managed $30 

million in assets. On November 9, 2011, PEIA filed an amended Form ADV for the last time, 

and claimed to have only $15 million in assets under management. On January 8, 2016, the 

Commission issued an order cancelling PEIA' s registration, having found that PEIA was not in 

existence, was not engaged in the investment adviser business, or was prohibited from 

registration as an investment adviser under Section 203A of the Advisers Act. 

17. Summit Trust Company ("Summit") is a Nevada-chartered trust company with its 

principal place of business in Las Vegas, Nevada, and a marketing office in Colmar, 

Pennsylvania. Kevin Brown and George Brown purchased Summit in 2004. Summit 

purportedly provided trust administration, estate planning, charitable giving, gift administration, 

and custodial services. In 2015, the Commission filed a lawsuit alleging that Summit, its 

owners, and others had defrauded Summit's clients. See SEC v. Summit Trust Co., et al., No. 15-

cv-5843 (E.D. Pa. Oct. 27, 2015). The defendants in that case were ordered to pay 

disgorgement, penalties, and prejudgment interest, and were enjoined from further violations of 

the securities laws. 

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18. Aptus Planning LLC ("Aptus") was a Florida limited liability company, with its 

principal place of business in Tampa, Florida, founded and operated by Quay and Ellison. 

Through Aptus, Quay and Ellison purportedly provided estate planning services and marketed 

life settlements and fixed annuity insurance products, among others. In September 2013, the 

Florida Department of State dissolved Aptus for failing to file its annual report. 

FACTS 

A. Paul and Ellis Create and Distribute Fraudulent Offering Materials 

19. From 2010 through at least November 2012, Paul and Ellis orchestrated a 

fraudulent scheme in which they falsely marketed themselves as experienced money managers 

with a highly successful track record of investing in exchange-traded funds ("ETFs") through 

their jointly owned, registered investment adviser, PEIA. 

20. During this period, Paul and Ellis created a variety of offering materials to solicit 

investor funds, including a 67-page PEIA prospectus, marketing brochures, PowerPoint 

presentations, and a PEIA website (collectively referred to as "PEIA Offering Materials"). 

21. The PEIA Offering Materials contained misrepresentations about PEIA' s 

investment strategy, assets under management, and investment performance, including: 

(a) Charts depicting wholly fabricated annual returns for each of PEIA's 

investment strategies, ranging from 8.51 % to 56.24%; 

(b) Claims that Paul and Ellis had extensive experience generating these high 

returns through PEIA' s proprietary investment strategies; and 

( c) Claims that PEIA had between $150 million to $164 million in "assets 

under advisement" when, in reality, Paul and Ellis never managed more 

than $4 million dollars. 

22. Each of these claims was false. Paul and Ellis copied most of the information 

relating to the investment strategies from the website of another registered investment adviser, 

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and "cut and pasted" the performance numbers from other sources into the PEIA Offering 

Materials. 

23. To solicit investor funds, Paul and Ellis distributed the fraudulent PEIA Offering 

Materials to numerous registered advisers, broker-dealers, and financial planning firms. 

24. Between December 2009 and November 2011, Ellis filed several Forms ADV for 

PEIA with the Commission that also grossly overstated PEIA's assets under management. 

B. Paul and Ellis Make Material Misstatements in Soliciting Summit's 
Investment in PEIA 

25. In mid-September 2010, officers of Summit met with Paul and Ellis to discuss 

retaining PEIA as an investment adviser. 

26. During the meeting, Paul and Ellis used a PowerPoint presentation containing 

misrepresentations regarding, among other things, PEIA' s assets under management and 

historical performance. For example, the PowerPoint presentation stated that PEIA had $150 

million iii "assets under advisement," and contained a table purporting to show that PEIA's 

"Strategic Growth Portfolio" generated average annual returns of25.13% between 2000 and 

2009. 

27. Summit retained PEIA as its investment adviser and began to invest in PEIA' s 

"Strategic Growth Portfolio." PEIA and Summit entered into an advisory agreement whereby 

PEIA agreed to manage Summit's invested funds for a fee. 

28. In December 2010, Summit officers again met with Paul and Ellis to discuss 

investing additional funds in PEIA. At this meeting, Paul and Ellis recommended PEIA' s 

"Quantitative Portfolio." Paul and Ellis provided the Summit officers with a Power Point 

presentation falsely stating that the Quantitative Portfolio had generated annual returns from 36% 

to 107% between 2008 and 2010. 

29. Summit thereafter invested additional sums with PEIA, with its final investment 

made on April 1, 2011. 

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30. Through their misrepresentations regarding PEIA, Paul and Ellis obtained a total 

of approximately $2,672,573 from Summit. Paul and Ellis invested, and ultimately lost much of 

Summit's investment. By November 2, 2011, when Summit withdrew the last of its funds from 

PEIA, it had suffered losses of approximately $744,330, or about 28% percent of its principal 

investment. Paul and Ellis also charged Summit nearly $9,000 in advisory fees. 

31. In 2012, Summit filed a lawsuit against Paul, Ellis, and PEIA, alleging, among 

other claims, violations of Section lO(b) of the Exchange Act and Rule lOb-5 thereunder, arising 

in part from misrepresentations Paul and Ellis made to Summit in S<?liciting Summit's investment 

with PEIA. See Summit Trust Co. v. Paul Ellis Investment Associates, LLC, et al., No. 12-cv-

6672 (E.D. Pa. Nov. 29, 2012). On August 2, 2013, the court entered a default judgment against 

Paul, Ellis, and PEIA in the amount of $761,426.16 and concluded that they had violated the 

securities laws. 

C. Paul, Ellis, Quay, and Ellison Make Material Misstatements In Soliciting 
Aptus Clients to Invest in PEIA 

32. In 2011, Paul and Ellis began marketing PEIA to Quay and Ellison, the co-owners 

of Aptus, a firm that purportedly provided financial planning for senior citizens. Paul and Ellis 

sought to have Quay and Ellison recommend PEIA's "Volatility Arbitrage Portfolio" ("V AP") 

strategy to Aptus' clients and prospective clients. 

33. Paul and Ellis provided Quay and Ellison with a four-page marketing brochure 

entitled "Aptus Planning Portfolios: Volatility Arbitrage Portfolio" (the "V AP Brochure"), which 

described the V AP as a conservative investment strategy that involved risking only 10% of an 

investor's principal investment. The V AP Brochure falsely stated that between 2008 and July 

2011, PEIA used this strategy to generate average annual returns of 46.70%. 

34. Paul and Ellis began marketing the V AP strategy in mid-2011 and created the 

V AP Brochure so that Quay and Ellison could use it to market PEIA' s investment advisory 

services to their current and prospective clients. Neither Quay nor Ellison did any due diligence 

regarding the claims in the V AP Brochure or into PEIA. 

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35. Subsequently, Quay and Ellison began soliciting potential investors for PEIA by 

hosting free dinner seminars arranged at a restaurant in the Tampa area. Many of the attendees 

were senior citizens who Quay and Ellison targeted through mass mailings. 

36. At such seminars, Ellison introduced Quay, and Quay referred to himself, as 

attorney "Stephen Jameson." Quay and Ellison also distributed documents to prospective 

investors listing Jameson and Ellison as directors of Aptus. At no time did Quay and Ellison tell 

prospective investors that Jameson was not Quay's real name. Quay and Ellison concealed 

Quay's real name and instead used a fictitious name to prevent prospective investors from 

researching Quay's background and discovering his tax fraud conviction and disbarment. 

37. Following each dinner presentation, Quay and Ellison invited prospective 

investors to schedule individual consultations at Aptus' office to discuss their financial planning 

needs. During these individual consultations, while continuing to conceal Quay's identity, Quay 

and Ellison used the V AP Brochure to promote PEIA' s Volatility Arbitrage Portfolio and touted 

Paul's and Ellis' experience as successful money managers. Paul and Ellis attended at least one 

of these consultations. 

38. On at least one occasion, Quay provided an investor with a proposal that Quay 

authored that contained additional false claims about PEIA's Volatility Arbitrage Portfolio, 

including that PEIA' s options trading strategy: "will [p ]rovide double digit returns with 

extremely low risk;" "[e]xposes less than 5% of your portfolio to market risk;" and was 

"averaging triple digit returns." 

39. Fourteen investors solicited by Quay and Ellison invested a total of approximately 

$1,295,000 with PEIA. These "Aptus investors" typically agreed that PEIA would receive as 

compensation 50% of their monthly returns. Paul and Ellis, in tum, agreed to share 65% of their 

fees with Quay and Ellison. 

D. Paul and Ellis Steal the Aptus Investors' Money 

40. Between July 2011 and February 2012, the Aptus investors collectively wired 

nearly $1.3 million to a PEIA bank account at Bank A controlled by Ellis. 

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41. Ellis then transferred approximately two-thirds of the approximately $1.3 million 

to a PEIA brokerage account. From July 2011 through February 2012, Paul and Ellis invested 

the funds in the PEIA brokerage account in various securities, including ETFs and ETF options. 

However, Paul and Ellis did not invest the remaining one-third of the Aptus investor funds, 

approximately $450,000, instead using some of this money to pay various personal and business 

expenses. For example, between July 2011 and February 2012, Ellis wired more than $68,000 to 

an Aptus account controlled by Quay. And Ellis paid over $50,000 to two Philadelphia law 

firms, $47,000 in apparent compensation to Paul, Ellis, and one other PEIA employee, and spent 

thousands of dollars in ATM withdrawals and debit card purchases for personal expenses. 

42. By April 2012, Paul and Ellis had spent nearly $190,000 of the approximately 

$450,000 in Aptus investor funds that they did not invest as promised. These expenditures also 

far exceeded any performance fees to which Paul, Ellis, Quay, or Ellison possibly could have 

been entitled. 

43. In April 2012, the brokerage firm holding PEIA's brokerage accounts closed 

PEIA' s accounts because of concerns about money laundering. Thereafter, Ellis wired the 

remaining balance of the Aptus investor money, approximately $635,000, to a PEIA bank 

account at Bank B. 

44. By the end of May 2012, Paul and Ellis combined PEIA's remaining Aptus 

investor funds, totaling more than $895,000, in PEIA's Bank B bank account. Paul and Ellis 

never invested the funds again. Instead, between May 2012 and November 2012, Paul and Ellis 

used these funds to pay business and other personal expenses, including: over $55,000 in 

multiple wire payments to Quay and Ellison; $68,500 in PEIA salary payments; thousands of 

dollars in transfers to various third parties; and numerous cash and debit card withdrawals. 

E. Quay's Unauthorized Trading and Material Misrepresentations 

45. On May 17, 2012, Ellis wired $385,900 to a bank account controlled by Quay, 

who at the time had two outstanding margin calls totaling $192,910 in a brokerage account he 

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controlled. Quay immediately transferred the $385,900 into the brokerage account (satisfying 

the margin calls), and used the Aptus investor funds to trade in Apple securities. By July 12, 

2012, the Aptus investor funds were gone. 

46. After Quay already had suffered significant trading losses, he told a few of the 

Aptus investors that he had invested a portion of their funds in his "option credit spread 

strategy." Quay lied to these investors about the performance of this investment, claiming that 

he was generating positive returns when, in reality, the remaining funds had already been lost. 

For example, on July 20, 2012, Quay wrote to an investor claiming his investment strategy was 

"performing as expected in the 2-4% weekly range," and signing the letter "Steve." In a letter 

dated October 18, 2012 and signed by Aptus Planning LLC, Quay wrote, "[w]e expect solid 

continued growth throughout the remainder of the year from our Apple credit spread strategy." 

One Aptus investor redeemed his entire investment early in the scheme, and another redeemed 

less than I 0% of the funds she invested. The remaining Aptus investors lost their entire 

investment with PEIA. 

FIRST CLAIM FOR RELIEF 

Violations of Section l 7(a) of the Securities Act By 
Paul, Ellis, Quay, and Ellison 

4 7. The Commission realleges and incorporates by reference each and every 

allegation in paragraphs I through 46, inclusive, as if they were fully set forth herein. 

48. By engaging in the conduct described above, Defendants Paul, Ellis, Quay, and 

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

of 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 untrue statements of material fact 

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

the circumstances under which they were made, not misleading; and/or 

( c) engaged in transactions, practices, or courses of business which operated 

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

49. By engaging in the foregoing conduct, Defendants Paul, Ellis, Quay, and Ellison 

violated and, unless enjoined, will continue to violate Section l 7(a) of the Securities Act [15 

U.S.C. § 77q(a)]. 

SECOND CLAIM FOR RELIEF 

Violations of Section lO(b) of the Exchange Act and Rule lOb-5 Thereunder By 
Paul, Ellis, Quay, and Ellison 

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

allegation in paragraphs 1 through 46, inclusive, as if they were fully set forth herein. 

51. By engaging in the conduct described above, Defendants Paul, Ellis, Quay, and 

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

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

any facility 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; and/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. 

52. By engaging in the foregoing conduct, Defendants Paul, Ellis, Quay, and Ellison 

violated and, unless enjoined, will continue to violate Section lO(b) of the Exchange Act [15 

U.S.C. § 78j(b)] and Rule lOb-5 thereunder [17 C.F.R. § 240.lOb-5]. 

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THIRD CLAIM FOR RELIEF 

Violations of Section 206(1) and 206(2) of the Advisers Act By 
Paul, Ellis, Quay, and Ellison 

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

allegation in paragraphs 1 through 46, inclusive, as if they were fully set forth herein. 

54. By engaging in the conduct described above, Defendants Paul, Ellis, Quay, and 

Ellison, while acting as investment advisers, by the use of the means and instrumentalities of 

interstate commerce and of the mails, directly or indirectly, knowingly or recklessly have 

employed and are employing devices, schemes, and artifices to defraud their clients and 

prospective clients; and have engaged and are engaging in transactions, practices, and courses of 

business which operate as a fraud or deceit upon their clients and prospective clients. 

55. By engaging in the foregoing conduct, Defendants Paul, Ellis, Quay, and Ellison 

have violated, and unless restrained will continue to violate, Sections 206(1) and 206(2) of the 

Advisers Act [15 U.S.C. §§ 80b-6(1) and 80b-6(2)]. 

FOURTH CLAIM FOR RELIEF 

Violations of Section 207 By Ellis 

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

allegation in paragraphs 1 through 46, inclusive, as if they were fully set forth herein. 

57. By engaging in the conduct described above, Defendant Ellis willfully made 

untrue statements of material fact in registration applications and/or reports filed with the 

Commission, or willfully omitted to state material facts required to be stated therein. 

58. By engaging in the foregoing conduct, Defendant Ellis violated, and unless 

restrained will continue to violate, Section 207 of the Advisers Act [15 U.S.C. § 80b-7]. 

FIFTH CLAIM FOR RELIEF 

Aiding and Abetting PEIA's Violations of Section 206(4) 
and Rule 206( 4)-l{a)(Sl Thereunder By Paul and Ellis 

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

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allegation in paragraphs 1 through 46, inclusive, as if they were fully set forth herein. 

60. By engaging in the conduct described above, PEIA, while it was a registered as 

and acting as an investment adviser, by the use of the means and instrumentalities of interstate 

commerce and of the mails, directly and indirectly, knowingly or recklessly engaged in acts, 

practices, or courses of business that were fraudulent, deceptive or manipulative with respect to 

investors and potential investors, specifically, PEIA directly or indirectly, published, circulated, 

or distributed advertisements which contained untrue statements of a material fact and/or which 

were otherwise false or misleading. 

61. By engaging in the foregoing conduct, PEIA violated Section 206(4) of the 

Advisers Act [15 U.S.C. § 80b-6( 4)] and Rule 206( 4)-1 (A)(5) thereunder [17 C.F .R. 275.206( 4)­

l (a)(5)]. 

62. Paul and Ellis were the principals of PEIA. Paul and Ellis owned and controlled 

PEIA and were generally aware of PEIA' s activities. 

63. By engaging in the conduct described above, Paul and Ellis knowingly or 

recklessly provided substantial assistance to PEIA in its publication, circulation, or distribution 

of advertisements which contained untrue statements of a material fact and/or which were 

otherwise false or misleading. 

64. By engaging in the foregoing conduct, Paul and Ellis aided and abetted PEIA's 

violations of Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 206(4)-l(a)(5) 

thereunder [17 C.F.R. 275.206(4)-l(a)(5)]. 

PRAYER FOR RELIEF 

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

judgment: 

I. 

Permanently restraining and enjoining Defendants Paul, Ellis, Quay, and Ellison from 

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

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II. 

Permanently restraining and enjoining Defendants Paul, Ellis, Quay, and Ellison from 

violating Section lO(b) of the Exchange Act [15 U.S.C. § 78j(b)], and Rule lOb-5 thereunder [17 

C.F.R. § 240.lOb-5]; 

III. 

Permanently restraining and enjoining Defendants Paul, Ellis, Quay, and Ellison from 

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

IV. 

Permanently restraining and enjoining Defendant Ellis from violating Section 207 of the 

Advisers Act [15 U.S.C. § 80b-7]; 

v. 
Permanently restraining and enjoining Defendants Paul and Ellis from aiding and 

abetting any violation of Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 

206(4)-l(a)(5) thereunder [17 C.F.R. 275.206(4)-l(a)(5)] by knowingly or recklessly providing 

substantial assistance to an investment adviser that publishes, circulates, or distributes 

advertisements which contain untrue statements of a material fact and/or which are otherwise 

false or misleading; 

VI. 

Ordering Defendants Paul, Ellis, Quay, and Ellison to disgorge any and all ill-gotten 

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

VII. 

Ordering Defendants Paul, Ellis, Quay, and Ellison to pay civil penalties pursuant to 

Section 21(d)(3) of the Exchange Act [15 U.S.C. §§ 78u(d)(3)], Section 20(d) of the Securities 

Act [15 U.S.C. §§ 77t(d)], and Section 209(e) of the Advisers Act [15 U.S.C. § 80b-9(e)]; and 

VIII. 

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

necessary. 

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Dated: April 1, 2016 

Respectfully submitted , 

G. Jeffrey Boujoukos (PA 672 15) 
David L. Axelrod 
Brendan P. McGlynn 
Mark R. Sylvester 
Lisa M. Candera 

Attorneys for Plaintiff: 

SECURITIES AND EXCHANGE COMMISSION 
1617 JFK Blvd., Suite 520 
Philadelphia, PA 19103 
Telephone: (2 15) 597-3100 
Facsimile: (215) 597-2740 

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