Hetzel v. American Medical Systems, Inc.

Thomas M. Melton ( 4999)
[email protected]
Daniel
J. Wadley (10358)
[email protected]
Attorneys for Plaintiff
Securities
& Exchange Commission
15 West South Temple Street, Suite 1800
Salt Lake City, Utah 84101
Tel. 801-524-5796
Fax: 801-524-5262
FILED
U.S. DISTRICT COUR J'
lOI~ JAN 31 A 10: 3'1
DISTRICT OF UTAH
BY:
DEPUTY CLERK
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION
SECURITIES AND EXCHANGE
COMMISSION,
PLAINTIFF,
v.
MICHAEL P. ZENGER
DEFENDANT.
COMPLAINT
Case: 2: 14-cv-00065
Assigned
To: Jenkins, Bruce S.
Assign. Date : 01/31/2014
Description: Securities and Exchange Commission
v. Zenger
Plaintiff, Securities and Exchange Commission (the "Commission"), for its Complaint
against defendant Michael P. Zenger, ("Zenger" or "Defendant"), alleges as follows:
INTRODUCTION
1. This matter involves a fraudulent scheme operated by Zenger in 2013. Zenger
raised $200,000 from two investors for the purported purpose
of raising capital, apparently
through a partnership arrangement, to trade futures contracts, commodities, and government
securities.
2. Zenger told investors that he would use their money for the sole purpose of
trading futures contracts, commodities, and government securities.

3. While Zenger used some investor money as represented, Zenger misappropriated
approximately $100,000
of the $200,000 he raised to pay personal expenses.
4. Zenger omitted to disclose to investors that their money would be used for his
personal expenses.
JURISDICTION AND VENUE
5. This Court has subject matter jurisdiction by authority of Sections 20 and 22 of
the Securities Act of 1933 (the "Securities Act") [15 U.S.C. §§ 77t and 77v], Sections 21 and
Section 27
ofthe Securities Exchange Act of 1934 (the "Exchange Act") [15 U.S.C. §§ 78u and
78aa].
6. Defendant, directly and indirectly, has made use of the means and
instrumentalities
of interstate commerce and the mails in connection with the transactions, acts
and courses
of business alleged herein, certain of which have occurred within the District of
Utah.
7. Venue for this action is  proper in the District
of Utah under Section 22(a) of the
Securities Act
[15 U.S.C. § 77v(a)], under Section 27 ofthe Exchange Act [15 U.S.C. § 78aa]
because certain
of the transactions, acts, practices, and courses of business alleged in this
Complaint took place in this district and because the Defendant resides in and transacts business
in this district.
8. Defendant, unless restrained and enjoined by this Court, will continue to engage
in the transactions, acts, practices, and course
of business alleged herein and in transactions, acts,
practices, and courses
of business of similar purport and object.
9. Defendant's conduct took place in connection with the offer, purchase and/or sale
of investment contracts issued by Zenger, which are securities.
2

DEFENDANT
10. Michael Zenger ("Zenger"), age 35, is  a Utah resident living in Lehi, Utah.
STATEMENT OF FACTS
11. Beginning in June 2013, Zenger solicited investor funds for the purported purpose
of raising capital to trade futures contracts, commodities, and government securities.
12. While Zenger did use some investor money to purchase and sell futures contracts,
Zenger misappropriated approximately $100,000
ofthe $200,000 he raised from investors to pay
for such personal expenses
as airplane rentals, monthly credit card bills, payments to BMW and
Mercedes Benz, purchases at  Saks Fifth A venue, Nordstrom and Costco, and to pay other
personal expenses.
13. Zenger also spent investor money to pay a civil judgment entered against him
after Zenger filed for bankruptcy and was successfully sued by the bankruptcy trustee
14. Zenger told investors that he would use their money for the sole purpose of
trading futures contracts, commodities, and government securities.
15. Zenger stated that any profits or losses from Zenger's trading activity would be
disclosed
to the investor.
16. Zenger told investors that although their money was deposited into Zenger's
personal bank account and then transferred into trading accounts titled solely in Zenger's name,
Zenger would not remove any
of the investors' money without their consent.
17. Zenger claimed that any profit generated by Zenger's trading activity would be
split between the investor and Zenger according to the terms outlined in their respective
investment contracts.
3

18. Zenger represented to investors that he was a successful trader and that he was
trading his personal money, in addition to any money they invested with him. Zenger told one
investor that he started with $65,000
of his personal money and doubled his money in his first
year
of trading.
19. Zenger assured investors that he would make trading decisions on their behalf,
including what
to trade, when to trade, and how much to trade.
20. Zenger pooled investor funds which were used for the common purpose
of trading
futures contracts, commodities, and government securities. Investors understood that Zenger
might pool their funds with his own personal money, and potentially other investor's money,
although investors stated that they assumed Zenger would be able
to account for their individual
profits and losses.
21. Zenger provided a written investment contract to at least one investor, entitled
"Managing Partner/Partner Agreement" which specified that Zenger was the "managing partner"
for the investor and would "act
as managing partner or as dealer" for the investor. The contract
specified that Zenger would act on behalf
of the investor, make all decisions related to buying
and selling futures contracts, commodities, and government securities, and was responsible for
the "execution, clearance and/or carrying"
of the transactions.
22. In addition
to specifying how Zenger and the investor will share the profits of
Zenger's trading activity, the investment contract guarantees that, at a minimum, the principal
amount invested will be returned to the investor upon the investor's demand.
23. Zenger did not provide any additional written information or disclosures
to
investors.
4

24. On June 3, 2013, Zenger's first investor wired $100,000 into Zenger's personal
bank account at J.P. Morgan Chase Bank, N.A., ("Chase") and Zenger transferred that $100,000
into a trading account at Mirus Futures, in Zenger's name.
25. On June
13, 2013, Zenger's second investor transferred $100,000 into Zenger's
personal bank account at Chase and Zenger transferred that $100,000 into a second personal
trading account at the same firm.
26. Both trading accounts were funded exclusively by investor funds.
27. In his account opening documents, Zenger falsely certified to Mirus Futures that
the money in his trading accounts belonged to him personally, that he did not trade on behalf
of
any other person or entity, and that he did not have a profit sharing agreement with anyone else.
28. On October 2, 2013, Zenger moved $52,000 from one trading account into his
other trading account thereby commingling the money
of his investors.
29. On October
7, 2013, Zenger liquidated $142,000 from his trading account at
Mirus Futures and deposited the proceeds into his personal bank account at America First Credit
Union.
30. On October 21, 2013, Zenger deposited $90,000, with a new trading firm, AMP
Global Clearing, LLC ("AMP") and explained
to an investor that he switched from Mirus
Futures
to AMP because it offered lower transaction fees.
31. Zenger provided
to both investors, or volunteered to provide, log on information
to his trading account so that they could view account activity.
32. Zenger represented to each investor that the funds in the trading account were that
of each individual investor. However, the funds were actually all that remained of the total
$200,000 invested.
5

33. On December 3, 2013, Zenger paid one investor, who had requested the return of
his principal, $79,000 and promised to repay the balance invested.
34. In or around December 2013, Zenger changed the log on information to the
trading account at AMP Global so that investors could not view the trading account information.
When questioned about the inability to log on, Zenger told the investor that the Securities and
Exchange Commission had frozen Zenger's trading accounts and the investor's access was
blocked, although Zenger could see his account balances. The Securities and Exchange
Commission had not frozen Zenger's account.
35. In or around January 2014, Zenger told an investor that the principal amount he
invested, $100,000, was safe in Zenger's trading account.
MATERIAL MISREPRESENTATIONS AND OMISSIONS
36. Contrary to the representations Zenger made to investors, Zenger did not use
investor funds for the exclusive purpose
of buying and selling futures contracts, commodities, or
government securities.
37. Bank records reflect that Zenger actually spent investor money on items such as
airplane rentals, monthly credit card bills, payments to BMW and Mercedes Benz, purchases at
Saks Fifth A venue, Nordstrom and Costco, and other personal expenses.
38. Bank records also reflect that Zenger used investor funds to pay a civil judgment
entered against him after Zenger filed for bankruptcy and was successfully sued by the
bankruptcy trustee.
3
9. Contrary to representations made by Zenger that his trading strategy was
successful and that he had doubled his personal money, Zenger lost approximately $20,000 in
trading activity and did not trade any personal funds.
6

40. Contrary to Zenger's representations to an investor in or around January 2014,
that his $100,000 investment was safe in Zenger's trading account, only $19,000 remained in
both Zenger's trading and bank accounts.
41. Contrary to Zenger's representations that the Commission had frozen Zenger's
trading and
ban1c accounts so Zenger could not repay investors, the Commission had not frozen
Zenger's trading or bank accounts.
42. The misrepresentations and omissions detailed above are material to a reasonable
investor.
43. Zenger acted with scienter. Zenger owned and controlled all trading accounts and
bank accounts for which investor funds were deposited. Zenger knew exactly what was done
with investors' capital.
44. Zenger authorized transfers
of investor funds to pay his personal expenses.
45. Zenger told investors that their investments would be deployed to trade futures
contracts, commodities, and government securities, yet Zenger spent investor money for airplane
rentals, monthly credit card bills, payments to
BMW and Mercedes Benz, purchases at Saks Fifth
Avenue, Nordstrom and Costco, and other personal expenses. Zenger also used investor funds to
pay a civil judgment entered against him that arose after Zenger filed for bankruptcy and was
successfully sued by the ban1cruptcy trustee.
46. Zenger knew that his representations to investors regarding the use
of their funds
were false.
7

FIRST CAUSE OF ACTION
EMPLOYMENT OF A DEVICE, SCHEME OR ARTIFICE TO DEFRAUD
Violation
of Section 17(a)(l) of the Securities Act [15 U.S.C. § 77q(a)(l)]
4 7. The Commission realleges and incorporates by reference the allegations contained
in paragraphs
1 through 46 above.
48. Defendant, by engaging in conduct described above, directly or indirectly, in the
offer or sale
of securities, by the use of the means or instruments of transportation or
communication in interstate commerce or by use of the mails, with scienter, employed devices,
schemes, or artifices to defraud.
49. By reason
of the foregoing, Defendant, directly or indirectly, violated, and unless
restrained and enjoined by this Court, will continue to violate Section 17(a)(1)
ofthe Securities
Act [15 U.S.C. § 77q(a)(l)].
SECOND CAUSE OF ACTION
FRAUD IN THE OFFER AND SALE OF SECURITIES
Violations
of Section 17(a)(2) and (3) of the Securities Act [15 U.S.C. § 77q(a)(2) and (3)]
50. The Commission realleges and incorporates by reference the allegations contained
in paragraphs 1 through 46 above.
51. Defendant, by engaging in the conduct described above, directly and indirectly, in
the offer and sale
of securities, by the use of the means or instruments of transportation or
communication in interstate commerce or by use
of the mails, obtained money or property by
means of untrue statements of material fact or by omitting to state a material fact necessary in
order to make the statements made, in light
of the circumstances under which they were made,
not misleading, and engaged in transactions, practices, or courses
of business which operate or
would operate as a fraud or deceit upon the purchaser.
8

52. By reason of the foregoing, Defendant, directly or indirectly, violated, and unless
restrained and enjoined will continue to violate, Section 17(a)(2) and 17(a)(3)
of the Securities
Act
[15 U.S.C. §§ 77q(a)(2) and 77q(a)(3)].
THIRD CAUSE OF ACTION
FRAUD IN CONNECTION WITH THE PURCHASE AND SALE OF SECURITIES
Violations
of Section 10(b) ofthe Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5
thereunder [17 C.F.R. § 240.10b-5]
53. The Commission realleges and incorporates by reference the allegations contained
in paragraphs 1 through 46 above.
54. Defendant, by engaging in the conduct described above, directly or indirectly, by
the use
of means or instrumentalities of interstate commerce or use of the mails, in connection
with the purchase or sale
of securities, with scienter: (1) employed devices, schemes, or artifices
to defraud; (2) made untrue statements
of material fact or omitted to state a material fact
necessary in order to make statements made, in light
of the circumstances under which they were
made not misleading; or (3) engaged in acts, practices, or courses
of business that operated or
would operate as a fraud and deceit upon other persons.
55. By reason
of the foregoing, Defendant violated, and unless restrained and
enjoined will continue to violate Section 1
O(b) of the Exchange Act [15 U.S.C. §78j(b )] and Rule
10b-5 thereunder [17 C.F.R. § 240.10b-5].
RELIEF REQUESTED
WHEREFORE, the Commission respectfully requests that this Court:
I.
Issue findings of fact and conclusions of law that Defendant committed the violations
charged herein.
9

II.
Issue in a form consistent with Rule 65( d) of the Federal Rules of Civil Procedure orders
that temporarily, preliminarily and permanently enjoin Defendant and his officers, agents,
servants, employees, attorneys, and accountants, and those persons in active concert or
participation with any
of them, who receive actual notice of the order by personal service or
otherwise, and each
of them, from engaging in transactions, acts, practices, and courses of
business described herein, and from engaging in conduct of similar purport and object in
violation
of Section17(a) of the Securities Act, Section 1 O(b) of the Exchange Act and Rule 1 Ob-
5 thereunder.
III.
Issue, in a form consistent with Rule 65(d) ofthe Federal Rules of Civil Procedure,
orders that temporarily, preliminarily and permanently enjoin Defendant and his officers, agents,
servants, employees, attorneys, and accountants, and those persons in active concert or
participation with any
of them, who receive actual notice of the order by personal service or
otherwise, and
eachofthem, from transferring, changing, wasting, dissipating, converting,
concealing, or otherwise disposing of, in any manner, any funds, assets, claims, or other property
or assets owned or controlled by, or in the possession or custody
of the Defendant.
IV.
Issue in a form consistent with Rule 65( d) of the Federal Rules of Civil Procedure orders
that temporarily, preliminarily and permanently restrain and enjoin Defendant, and his officers,
agents, servants, employees, attorneys, and accountants, and those persons in active concert or
participation with any
of them, who receive actual notice of the order by personal service or
otherwise, and each
ofthem, from destroying, mutilating, concealing, transferring, altering, or
10

otherwise disposing of, in any manner, books, records, computer programs, computer files,
computer printouts, correspondence, including e-mail, whether stored electronically or in hard
copy, memoranda, brochures, or any other documents
of any kind that pertain in any manner to
the business
of Defendant.
v.
Enter an order directing Defendant to pay civil money penalties pursuant to Section 20( d)
ofthe Securities Act and Section 21(d)(3) ofthe Exchange Act.
VI.
Enter an order directing Defendant to disgorge all ill-gotten gains received during the
period
of violative conduct and pay prejudgment interest on such ill-gotten gains.
VII.
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~~ this Court.
"/;}//'
Dated January +I--' 2014.
melt nt sec. ov
Atto ney for Plaintiff
e 1rities and Exchange Commission
15 West South Temple, Suite 1800
Salt Lake City, Utah 84101
Tel: 801-524-5796
Fax: 801-524-5262
11

Thomas M. Melton ( 4999) 
[email protected] 
Daniel J. Wadley (10358) 
[email protected] 
Attorneys for Plaintiff 
Securities & Exchange Commission 
15 West South Temple Street, Suite 1800 
Salt Lake City, Utah 84101 
Tel. 801-524-5796 
Fax: 801-524-5262 

FILED 
U.S. DISTRICT COUR J' 

lOI~ JAN 31 A 10: 3'1 

DISTRICT OF UTAH 

BY: 
DEPUTY CLERK 

IN THE UNITED STATES DISTRICT COURT 
DISTRICT OF UTAH, CENTRAL DIVISION 

SECURITIES AND EXCHANGE 
COMMISSION, 

PLAINTIFF, 

v. 

MICHAEL P. ZENGER 

DEFENDANT. 

COMPLAINT 

Case: 2: 14-cv-00065 
Assigned To: Jenkins, Bruce S. 
Assign. Date : 01/31/2014 
Description: Securities and Exchange Commission v. Zenger 

Plaintiff, Securities and Exchange Commission (the "Commission"), for its Complaint 

against defendant Michael P. Zenger, ("Zenger" or "Defendant"), alleges as follows: 

INTRODUCTION 

1. This matter involves a fraudulent scheme operated by Zenger in 2013. Zenger 

raised $200,000 from two investors for the purported purpose of raising capital, apparently 

through a partnership arrangement, to trade futures contracts, commodities, and government 

securities. 

2. Zenger told investors that he would use their money for the sole purpose of 

trading futures contracts, commodities, and government securities. 

   Case 2:14-cv-00065-BSJ Document 1 Filed 01/31/14 Page 1 of 11 



3. While Zenger used some investor money as represented, Zenger misappropriated 

approximately $100,000 of the $200,000 he raised to pay personal expenses. 

4. Zenger omitted to disclose to investors that their money would be used for his 

personal expenses. 

JURISDICTION AND VENUE 

5. This Court has subject matter jurisdiction by authority of Sections 20 and 22 of 

the Securities Act of 1933 (the "Securities Act") [15 U.S.C. §§ 77t and 77v], Sections 21 and 

Section 27 ofthe Securities Exchange Act of 1934 (the "Exchange Act") [15 U.S.C. §§ 78u and 

78aa]. 

6. Defendant, directly and indirectly, has made use of the means and 

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

and courses of business alleged herein, certain of which have occurred within the District of 

Utah. 

7. Venue for this action is proper in the District of Utah under Section 22(a) of the 

Securities Act [15 U.S.C. § 77v(a)], under Section 27 ofthe Exchange Act [15 U.S.C. § 78aa] 

because certain of the transactions, acts, practices, and courses of business alleged in this 

Complaint took place in this district and because the Defendant resides in and transacts business 

in this district. 

8. Defendant, unless restrained and enjoined by this Court, will continue to engage 

in the transactions, acts, practices, and course of business alleged herein and in transactions, acts, 

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

9. Defendant's conduct took place in connection with the offer, purchase and/or sale 

of investment contracts issued by Zenger, which are securities. 

2 

   Case 2:14-cv-00065-BSJ Document 1 Filed 01/31/14 Page 2 of 11 



DEFENDANT 

10. Michael Zenger ("Zenger"), age 35, is a Utah resident living in Lehi, Utah. 

STATEMENT OF FACTS 

11. Beginning in June 2013, Zenger solicited investor funds for the purported purpose 

of raising capital to trade futures contracts, commodities, and government securities. 

12. While Zenger did use some investor money to purchase and sell futures contracts, 

Zenger misappropriated approximately $100,000 ofthe $200,000 he raised from investors to pay 

for such personal expenses as airplane rentals, monthly credit card bills, payments to BMW and 

Mercedes Benz, purchases at Saks Fifth A venue, Nordstrom and Costco, and to pay other 

personal expenses. 

13. Zenger also spent investor money to pay a civil judgment entered against him 

after Zenger filed for bankruptcy and was successfully sued by the bankruptcy trustee 

14. Zenger told investors that he would use their money for the sole purpose of 

trading futures contracts, commodities, and government securities. 

15. Zenger stated that any profits or losses from Zenger's trading activity would be 

disclosed to the investor. 

16. Zenger told investors that although their money was deposited into Zenger's 

personal bank account and then transferred into trading accounts titled solely in Zenger's name, 

Zenger would not remove any of the investors' money without their consent. 

17. Zenger claimed that any profit generated by Zenger's trading activity would be 

split between the investor and Zenger according to the terms outlined in their respective 

investment contracts. 

3 

   Case 2:14-cv-00065-BSJ Document 1 Filed 01/31/14 Page 3 of 11 



18. Zenger represented to investors that he was a successful trader and that he was 

trading his personal money, in addition to any money they invested with him. Zenger told one 

investor that he started with $65,000 of his personal money and doubled his money in his first 

year of trading. 

19. Zenger assured investors that he would make trading decisions on their behalf, 

including what to trade, when to trade, and how much to trade. 

20. Zenger pooled investor funds which were used for the common purpose of trading 

futures contracts, commodities, and government securities. Investors understood that Zenger 

might pool their funds with his own personal money, and potentially other investor's money, 

although investors stated that they assumed Zenger would be able to account for their individual 

profits and losses. 

21. Zenger provided a written investment contract to at least one investor, entitled 

"Managing Partner/Partner Agreement" which specified that Zenger was the "managing partner" 

for the investor and would "act as managing partner or as dealer" for the investor. The contract 

specified that Zenger would act on behalf of the investor, make all decisions related to buying 

and selling futures contracts, commodities, and government securities, and was responsible for 

the "execution, clearance and/or carrying" of the transactions. 

22. In addition to specifying how Zenger and the investor will share the profits of 

Zenger's trading activity, the investment contract guarantees that, at a minimum, the principal 

amount invested will be returned to the investor upon the investor's demand. 

23. Zenger did not provide any additional written information or disclosures to 

investors. 

4 

   Case 2:14-cv-00065-BSJ Document 1 Filed 01/31/14 Page 4 of 11 



24. On June 3, 2013, Zenger's first investor wired $100,000 into Zenger's personal 

bank account at J.P. Morgan Chase Bank, N.A., ("Chase") and Zenger transferred that $100,000 

into a trading account at Mirus Futures, in Zenger's name. 

25. On June 13, 2013, Zenger's second investor transferred $100,000 into Zenger's 

personal bank account at Chase and Zenger transferred that $100,000 into a second personal 

trading account at the same firm. 

26. Both trading accounts were funded exclusively by investor funds. 

27. In his account opening documents, Zenger falsely certified to Mirus Futures that 

the money in his trading accounts belonged to him personally, that he did not trade on behalf of 

any other person or entity, and that he did not have a profit sharing agreement with anyone else. 

28. On October 2, 2013, Zenger moved $52,000 from one trading account into his 

other trading account thereby commingling the money of his investors. 

29. On October 7, 2013, Zenger liquidated $142,000 from his trading account at 

Mirus Futures and deposited the proceeds into his personal bank account at America First Credit 

Union. 

30. On October 21, 2013, Zenger deposited $90,000, with a new trading firm, AMP 

Global Clearing, LLC ("AMP") and explained to an investor that he switched from Mirus 

Futures to AMP because it offered lower transaction fees. 

31. Zenger provided to both investors, or volunteered to provide, log on information 

to his trading account so that they could view account activity. 

32. Zenger represented to each investor that the funds in the trading account were that 

of each individual investor. However, the funds were actually all that remained of the total 

$200,000 invested. 

5 

   Case 2:14-cv-00065-BSJ Document 1 Filed 01/31/14 Page 5 of 11 



33. On December 3, 2013, Zenger paid one investor, who had requested the return of 

his principal, $79,000 and promised to repay the balance invested. 

34. In or around December 2013, Zenger changed the log on information to the 

trading account at AMP Global so that investors could not view the trading account information. 

When questioned about the inability to log on, Zenger told the investor that the Securities and 

Exchange Commission had frozen Zenger's trading accounts and the investor's access was 

blocked, although Zenger could see his account balances. The Securities and Exchange 

Commission had not frozen Zenger's account. 

35. In or around January 2014, Zenger told an investor that the principal amount he 

invested, $100,000, was safe in Zenger's trading account. 

MATERIAL MISREPRESENTATIONS AND OMISSIONS 

36. Contrary to the representations Zenger made to investors, Zenger did not use 

investor funds for the exclusive purpose of buying and selling futures contracts, commodities, or 

government securities. 

37. Bank records reflect that Zenger actually spent investor money on items such as 

airplane rentals, monthly credit card bills, payments to BMW and Mercedes Benz, purchases at 

Saks Fifth A venue, Nordstrom and Costco, and other personal expenses. 

38. Bank records also reflect that Zenger used investor funds to pay a civil judgment 

entered against him after Zenger filed for bankruptcy and was successfully sued by the 

bankruptcy trustee. 

3 9. Contrary to representations made by Zenger that his trading strategy was 

successful and that he had doubled his personal money, Zenger lost approximately $20,000 in 

trading activity and did not trade any personal funds. 

6 

   Case 2:14-cv-00065-BSJ Document 1 Filed 01/31/14 Page 6 of 11 



40. Contrary to Zenger's representations to an investor in or around January 2014, 

that his $100,000 investment was safe in Zenger's trading account, only $19,000 remained in 

both Zenger's trading and bank accounts. 

41. Contrary to Zenger's representations that the Commission had frozen Zenger's 

trading and ban1c accounts so Zenger could not repay investors, the Commission had not frozen 

Zenger's trading or bank accounts. 

42. The misrepresentations and omissions detailed above are material to a reasonable 

investor. 

43. Zenger acted with scienter. Zenger owned and controlled all trading accounts and 

bank accounts for which investor funds were deposited. Zenger knew exactly what was done 

with investors' capital. 

44. Zenger authorized transfers of investor funds to pay his personal expenses. 

45. Zenger told investors that their investments would be deployed to trade futures 

contracts, commodities, and government securities, yet Zenger spent investor money for airplane 

rentals, monthly credit card bills, payments to BMW and Mercedes Benz, purchases at Saks Fifth 

Avenue, Nordstrom and Costco, and other personal expenses. Zenger also used investor funds to 

pay a civil judgment entered against him that arose after Zenger filed for bankruptcy and was 

successfully sued by the ban1cruptcy trustee. 

46. Zenger knew that his representations to investors regarding the use of their funds 

were false. 

7 

   Case 2:14-cv-00065-BSJ Document 1 Filed 01/31/14 Page 7 of 11 



FIRST CAUSE OF ACTION 
EMPLOYMENT OF A DEVICE, SCHEME OR ARTIFICE TO DEFRAUD 

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

4 7. The Commission realleges and incorporates by reference the allegations contained 

in paragraphs 1 through 46 above. 

48. Defendant, by engaging in conduct described above, directly or indirectly, in the 

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

communication in interstate commerce or by use of the mails, with scienter, employed devices, 

schemes, or artifices to defraud. 

49. By reason of the foregoing, Defendant, directly or indirectly, violated, and unless 

restrained and enjoined by this Court, will continue to violate Section 17(a)(1) ofthe Securities 

Act [15 U.S.C. § 77q(a)(l)]. 

SECOND CAUSE OF ACTION 
FRAUD IN THE OFFER AND SALE OF SECURITIES 

Violations of Section 17(a)(2) and (3) of the Securities Act [15 U.S.C. § 77q(a)(2) and (3)] 

50. The Commission realleges and incorporates by reference the allegations contained 

in paragraphs 1 through 46 above. 

51. Defendant, by engaging in the conduct described above, directly and indirectly, in 

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

communication in interstate commerce or by use of the mails, obtained money or property by 

means of untrue statements of material fact or by omitting to state a material fact necessary in 

order to make the statements made, in light of the circumstances under which they were made, 

not misleading, and engaged in transactions, practices, or courses of business which operate or 

would operate as a fraud or deceit upon the purchaser. 

8 

   Case 2:14-cv-00065-BSJ Document 1 Filed 01/31/14 Page 8 of 11 



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

restrained and enjoined will continue to violate, Section 17(a)(2) and 17(a)(3) of the Securities 

Act [15 U.S.C. §§ 77q(a)(2) and 77q(a)(3)]. 

THIRD CAUSE OF ACTION 
FRAUD IN CONNECTION WITH THE PURCHASE AND SALE OF SECURITIES 

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

53. The Commission realleges and incorporates by reference the allegations contained 

in paragraphs 1 through 46 above. 

54. Defendant, by engaging in the conduct described above, directly or indirectly, by 

the use of means or instrumentalities of interstate commerce or use of the mails, in connection 

with the purchase or sale of securities, with scienter: (1) employed devices, schemes, or artifices 

to defraud; (2) made untrue statements of material fact or omitted to state a material fact 

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

made not misleading; or (3) engaged in acts, practices, or courses of business that operated or 

would operate as a fraud and deceit upon other persons. 

55. By reason of the foregoing, Defendant violated, and unless restrained and 

enjoined will continue to violate Section 1 O(b) of the Exchange Act [15 U.S.C. §78j(b )] and Rule 

10b-5 thereunder [17 C.F.R. § 240.10b-5]. 

RELIEF REQUESTED 

WHEREFORE, the Commission respectfully requests that this Court: 

I. 

Issue findings of fact and conclusions of law that Defendant committed the violations 

charged herein. 

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II. 

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

that temporarily, preliminarily and permanently enjoin Defendant and his officers, agents, 

servants, employees, attorneys, and accountants, and those persons in active concert or 

participation with any of them, who receive actual notice of the order by personal service or 

otherwise, and each of them, from engaging in transactions, acts, practices, and courses of 

business described herein, and from engaging in conduct of similar purport and object in 

violation of Section17(a) of the Securities Act, Section 1 O(b) of the Exchange Act and Rule 1 Ob-

5 thereunder. 

III. 

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

orders that temporarily, preliminarily and permanently enjoin Defendant and his officers, agents, 

servants, employees, attorneys, and accountants, and those persons in active concert or 

participation with any of them, who receive actual notice of the order by personal service or 

otherwise, and eachofthem, from transferring, changing, wasting, dissipating, converting, 

concealing, or otherwise disposing of, in any manner, any funds, assets, claims, or other property 

or assets owned or controlled by, or in the possession or custody of the Defendant. 

IV. 

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

that temporarily, preliminarily and permanently restrain and enjoin Defendant, and his officers, 

agents, servants, employees, attorneys, and accountants, and those persons in active concert or 

participation with any of them, who receive actual notice of the order by personal service or 

otherwise, and each ofthem, from destroying, mutilating, concealing, transferring, altering, or 

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otherwise disposing of, in any manner, books, records, computer programs, computer files, 

computer printouts, correspondence, including e-mail, whether stored electronically or in hard 

copy, memoranda, brochures, or any other documents of any kind that pertain in any manner to 

the business of Defendant. 

v. 

Enter an order directing Defendant to pay civil money penalties pursuant to Section 20( d) 

ofthe Securities Act and Section 21(d)(3) ofthe Exchange Act. 

VI. 

Enter an order directing Defendant to disgorge all ill-gotten gains received during the 

period of violative conduct and pay prejudgment interest on such ill-gotten gains. 

VII. 

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~~ this Court. 

"/;}//' 
Dated January +I--' 2014. 

melt nt sec. ov 
Atto ney for Plaintiff 

e 1rities and Exchange Commission 
15 West South Temple, Suite 1800 
Salt Lake City, Utah 84101 
Tel: 801-524-5796 
Fax: 801-524-5262 

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