SEC files emergency action against Winston Reed Investments
The company and its principal allegedly raised money from dozens of investors based on promises of exorbitant returns and then misappropriated investor funds.
The United States Securities and Exchange Commission (SEC) today announces that it has filed an emergency action and obtained a temporary restraining order and asset freeze against a purported investment firm and its principal who allegedly raised money from dozens of investors based on false promises of high returns and then misappropriated over $150,000 of investor funds.
The SEC’s Complaint targets Winston Reed Investments, its control person Mark Nicholas Pyatt, and names Daniel Gregory Randolph as relief defendant.
Winston Reed Investments L.L.C. Is a North Dakota limited liability company formed by Pyatt in April 2017. Mark Nicholas Pyatt was listed on documents provided to investors as the vice president of and investment consultant for Winston Reed.
According to the SEC’s complaint, beginning in April 2017, Winston Reed Investments LLC and Mark N. Pyatt raised hundreds of thousands of dollars from retail investors by representing they would use a sophisticated trading strategy to trade in futures contracts, foreign exchange, and stocks. Instead, Pyatt allegedly used the vast majority of investor money for personal items, including vehicles, jewelry, groceries, and cigars. Winston Reed and Pyatt also allegedly used a portion of new investor money to make payments to other investors.
To further conceal their fraud, in February 2019, shortly before the initial investors were eligible to withdraw funds due to a purported 24 month lock-up period, the defendants told investors that “a complete and catastrophic loss” had occurred that prevented Winston Reed from returning any funds. Pyatt falsely told investors that the cause of this “catastrophic loss” was the alleged failure of Winston Reed’s brokerage firm to implement a trading instruction properly. In truth, Pyatt could not repay investors because he had already misappropriated the majority of investors’ funds.
According to the SEC’s Complaint, Pyatt is continuing his efforts to defraud investors, by among other things, telling them of his intention to restart his trading group using a new trading platform.
The complaint charges Winston Reed and Pyatt with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks emergency relief, as well as permanent injunctions, disgorgement of allegedly ill-gotten gains with prejudgment interest, and a civil penalty.
The complaint also seeks disgorgement of allegedly ill-gotten gains with prejudgment interest from a relief defendant, Daniel G. Randolph. Randolph was listed on documents provided to investors as the president and owner of Winston Reed. Winston Reed and Pyatt transferred to Relief Defendant Daniel Gregory Randolph approximately $23,787 in investors’ funds that originated from the fraud. Randolph provided no consideration in exchange for these funds and he has no legitimate claim to the money that he received.
The complaint was filed at the Court for the Western District of North Carolina.
