Litigation Releases (Thompson Hunt and Associates, Ltd., et al.)

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 26069 / August 8, 2024

Securities and Exchange Commission v. Thompson Hunt and Associates, Ltd., et al., No. 24-civ-6035 (S.D.N.Y. filed August 8, 2024)

SEC Charges Multiple Individuals and Entities for Fraudulent Schemes That Victimized Elderly Investors

The Securities and Exchange Commission today charged Thompson Hunt and Associates, Ltd. ("THA"), Carl Arnal a/k/a Michael J. Cohen ("Arnal"), Christopher Vaughan ("Vaughan"), Brookdale Consultants LLC ("Brookdale"), Growth Point Consultants, Inc. ("GPC"), Damon Artis ("Artis"), and Richard Gavzie ("Gavzie") for their respective roles in connection with two fraudulent schemes: an offering fraud involving interests in THA between May 2021 and April 2023, and the fraudulent sale of microcap securities between June 2016 and September 2023. Both schemes victimized elderly investors.

The SEC's complaint, filed in U.S. District Court for the Southern District of New York, alleges that Arnal and Vaughan, THA's executives, arranged to sell unregistered securities in THA and used Brookdale, which is owned by Artis, to solicit investors. The complaint alleges that Artis directed Gavzie to solicit investors on THA's behalf and that Gavzie made material misrepresentations to investors, including falsely describing the THA investment as a government bond. The complaint further alleges that the investment contract that THA prepared contained material misrepresentations, and that Arnal and Vaughan then misappropriated more than $1 million of the $1.3 million that Brookdale raised on THA's behalf by making Ponzi payments, undisclosed commission payments, and paying for the legal fees of Arnal's friend. In addition to facilitating the offering fraud, the complaint alleges that Artis and Gavzie have for years been engaged in the fraudulent sale of microcap securities. The complaint alleges that Artis and Gavzie solicited approximately $7 million in investor funds in this manner and regularly made materially misleading statements during the solicitation process. For example, they misrepresented the source of the shares they were selling and made materially misleading recommendations without disclosing the fact that they were receiving commissions of approximately 30% or more. According to the complaint, in total, Artis, Gavzie, and GPC received at least $2.7 million in transaction-based compensation, despite not being registered as a broker-dealer or affiliated with registered broker-dealers.

The complaint charges all defendants with violating, and in some cases aiding and abetting violations of, Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint charges THA, Arnal, Vaughan, Brookdale, Artis, and Gavzie with violating Section 5 of the Securities Act, and Brookdale, GPC, Artis, and Gavzie with violating Section 15 of the Exchange Act. The complaint also includes aiding and abetting claims against Arnal, Vaughan, and Gavzie, and aiding and abetting and control person claims against Artis. The complaint seeks permanent injunctions, disgorgement, prejudgment interest, civil penalties, officer and director bars against Arnal, Vaughan, and Artis, and penny stock bars against Artis and Gavzie.

The SEC's investigation was conducted by Nicholas Karasimas, William Conway, Douglas Smith, and Sandeep Satwalekar, and supervised by Tejal Shah, all of the New York Regional Office. The litigation will be led by David Zetlin-Jones, Mr. Karasimas, Mr. Conway, and Mr. Satwalekar, and supervised by Preethi Krishnamurthy.