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SEC obtains summary judgment against defendants in fraudulent investment scheme

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The Securities and Exchange Commission announced today that on June 6, 2011, the Honorable Dale A. Kimball of the United States District Court for the District of Utah granted the SEC’s motion for summary judgment and entered final judgment against defendants Brian J Smart of Lehi, Utah, and his company Smart Assets, LLC.


The Court found that Smart and his company violated the antifraud provisions of the federal securities laws, and ordered defendants to pay USD4.7 million in disgorgement and civil penalties.

The SEC filed this action against the defendants on March 11, 2009, alleging that Smart and his company had engaged in a Ponzi-like scheme in the offer and sale of promissory notes and other securities. The complaint alleged that Smart falsely represented to investors, including senior citizens, that he was providing a conservative, liquid investment opportunity. Instead, according to the complaint, Smart was misappropriating investor funds for his own personal use, investing in illiquid and ill-fated real estate ventures, and using proceeds from new investors to make payments to earlier investors.

On the day this action was filed, the Court granted the SEC’s motion for a temporary restraining order, asset freeze, and other preliminary relief. Subsequently, on August 21, 2009, the Court granted the SEC’s motion for a preliminary injunction against the defendants.

After completion of discovery in this case, the parties moved for summary judgment. In granting the SEC’s motion for summary judgment and entering final judgment, the Court found that Smart and his company misappropriated over USD2.05 million from investors through a “systematic program of deception and fraud.” The Court found that Smart targeted elderly investors and that he falsely represented that he would place investor funds in safe, principal guaranteed investments. Instead, the Court found, Smart used investor money to pay personal expenses, to invest in risky real estate ventures and hard money loans, and to pay purported “dividends” to other investors.

The Court’s final judgment against Smart and Smart Assets permanently enjoins the defendants from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5, and orders defendants to pay USD2,059,077 in disgorgement, USD597,426 in prejudgment interest, and a USD2,059,077 civil penalty.

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