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Securities Law 11/25/2009 8:23:23 AM EST Where are the Market Crisis Cases? Partner, Porter Wright Morris & Arthur The SEC continued its almost endless stream of investment fraud cases on Friday, filing an action against Shidaal Express, Inc. and its principal, Mohamud Abdi Ahmed. SEC v. Shidaal Express, Inc., Case No. 09 cv 2610 (S.D. Cal. Filed Nov. 19, 2009). As in many of these cases, the complaint alleges a fraud in which investors were fleeced of millions of dollars. According to the SEC, Mr. Ahmed raised over $3 million from 40 investors for his alleged stock trading business. His sales pitch was targeted to members of the Somali immigrant community in San Diego, Seattle and elsewhere. Many of those belonged to a mosque in San Diego. Investors were promised exorbitant returns of 5% per month or 60% per year. They were assured that the investment was safe. Several investors put in their life savings. As so often happens in these cases there were returns at first, but ultimately the money was not invested as promised, the returns were not paid and portions were misappropriated. The SEC is litigating this case which unfortunately reflects an all too common story replayed over and over in the dozens of investment and Ponzi scheme cases the agency has brought in recent months. See also Litig. Rel. 21310 (Nov. 20, 2009).
While Ponzi and other investment scheme cases were once thought hard to find post-Madoff, that difficulty seems to have diminished. Whether that is because of a new focus resulting from Madoff, the market crisis or other factors is unclear. At the same time, this new stream of cases raises another question. What happened to the “market crisis” investigations. SEC officials have touted for months the dozens of market crisis related investigations underway. The speech of Commissioner Walter last March, for example, detailed dozens of inquiries in progress as discussed here. Those inquiries cover a range of subjects from subprime lenders, investment banks, large financial institutions, market rumors and manipulation to hedge funds.
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