Document1 Filed0352008 Page 1 of 13 Case3:08-cv-00400-US-BLM

ORICINAL I DONALDW. SEARLES, Ca].BarNo. 135705

SearlesD@sec.gov2 KELLY BOWERS, Cal. Bar No. 164007

BowersK@sec.$ovJ:.CINDYESON,Cal.BarNo.219782EbonJC@sec.goi,

A ROBERTOA. TERCERO,Cal.BarNo. 143760TercerbR@sec.gov

) ' , : Attomeys foi Plaintiff

6 Securitiesand Exchange CommissionRosalindR. lysop, Acting Regional DirectorAndrew Petillon,'Associate RegionalDirector5670 Wilshire Boulevard, I lth Floor

8 Los Angeles, Califomia 90036Telephone:(323)965-3998

9 Facsimile:(323)965-3908

l0

l l UNITED STATES DISTRICT COURT

t2 SOUTHERN DISTRICT O[' CALIFORNIA

l3 cv u400DMsBLM

t4 SECURITIESAND EXCHANGE c*"No.,'0gCOMMISSION,

l5 Co[DLAr{T FoR VIoLATIoNS OF TM i i

r6 . Plaintiff, FbpERAL SEcuRrrrFs LAws !.

ll

1 4 vs, I I

l8 TUQOTRADING, LLC'hnd DOUGLASG. FREDERICK,

t9 Defendants.

20

2l

22

23

24 ? {

26

27

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1Case 3:08-cv-00400-US-BLM Document Filed 0U/2008 Page2 of '13

I Plaintiff Securities and Exchange Commission("Commission")allegesas follows:

2 SUMMARY

1. This caseinvolves ongoing violations ofthe antifraud and broker-dealer

4 registrationprovisionsofthe federalsecurities laws by T\rco Trading, LLC ('"Tuco"),an

5 unregistered Southem Califomia securities day-trading firm, and its controllingprincipal,

6 Douglas G. Frederick f'Frederick" and collectively "Defendants').

2. TucoandFrederickprovideday-hading capability to over 250day-faders. A

8 day-traderactivelypurchasesand sells securities, often on the same day, and hopes to make at

9 least a small profitona large number of buy-and-sell transactions.T\rco and Frederick allow

10 Tuco's members to day-trade through Tuco's own brokerage accounts ('tnasteraccounts"), by

l l creating"sub-accounts"for each trader. TucoandFrederick then hack the activity in each

t2 tader's sub-account,including hades, balances, commissions,fees; deposits andwithdrawals,

13 which Tuco reports to the trader on a daily basis, T\rco, however, is not registered as a broker or

t4 dealer with the Commission, in violationof Sectionl5(a) of the ExchangeAct, l5 U.S.C.

l5 $78o(a)(1).

16 3. Tuco and Frederic.kenticetraders with services unavailable to day-traders at any

17 registeredbroker-dealer. First, the Defendants allow a bader to day-hade evenifhis or her zub­

t8 accounthasless than $25,000equity, which, under applicable NationalAssociationof Securities

t9 Dealers('NASD') regulations,is the minimum equity re4uitement to day-tode. Second, tadets

20 at Tuco can use up to $20ofTuco's equity to purchasesecuritiesfor each $1in the tader's sub­

21 account(i,e.,20:l bulng power).ApplicableNASD and New York Stock Exchange('TIYSE')

22 rules,however, only allow a day-traderto have 4:1 bulng power,

23 4. Tuco and Frederickare also violating the antifraud provisionsof Section lO(b) of

24 the Exchange Act and Rule 10b-5 thereunder, i5 U.S.C. $ 78jO) and 17 C.F.R. $ 240.10b-5. On

25 a daily basis, Tuco and Frederick report to the haders their purportedequitybalancesin tbeir

26 sub-accounts. As of December 3 I , 2007, however, Tuco and Frederick haveused approximately

27 $3.62million ofthe taders' approximate$10.2million total equity to payTuco'sexpensesand

28 to cover trader losses. In reporting the traders' equity balances, however, Tuco andFrederick

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1 Pase 3 of 13Case 3:08-cv-00400-US-BLMDocument Filed 03152008

I have failed to disolose to Tuco's haders that their equity balances are overstatod andthat Tuco

havemisused 35% ofthe traders' 2 and Frederick approximately equitytopayTuco's expenses

andtocover other traders' losses. Defendants'misuseof the haders' equityis continuousand

4 ongoing. As of lanuary 3 l, 2008, TucoandFrederickused approximately $ I .35 million of the

) traders'approximate$I 1.4 million total equity to payTuco's expenses and to cover trader losses.

6 5. TheDefendants'conduct violates the antifraud and broker-dealer registration

7 provisionsof the federal securities laws. By this action, the Commission seeks a temporary

8 reshainingorder,prelirninaryandpermanentinjunctive relief, an asset freeze, an accounting, an

9 orderpreventingthe destruction of documents, the appoinhnent of a receiver overT\rco,

l0 disgorgementwith prejudgnentinterestofthe defendants' ill-gotten gains,and civil penalties.

l l I I TmDEFENDANTS

12 6. Tuco Trading, LLC, is a Nevada limited liability companyformed in August 2006

l3 and based in La Jolla, Califomia. Tuco is a self-described sub­"tradingfirm" that creates

t4 accounts for mernbers to day-trade securities through Tuco's master brokerage accounts. Tirco is

l5 not registered with the Commission as a brokeror dealer,

16 7. Douglas G. Frederick, age 38, residesin San Diego, Califomia. Frederick formed

I7 Tuco in August 2006 andis its solemanaging member. He has held various securities licenses,

l8 including Series 6 and 7 since1993 and Series 55 and 63 since 2002. Frederick has been

t9 associatedas a registered representativewith thirteen broker-dealers since1993, including GLB

20 Trading, lnc. since April 2006. Frederick is not registeredwith theCommissionin anycapacity.

2 l RELATEDNON.PARTY

n'l LL 8. GLB Trading, Inc. ("GLB Trading') has been registered with the Commission

23 since2003as a broker-dealer. It is an introducing broker-dealer basedin Irvine, Califomia,and

24 clearsthrough Penson Financial Services,Inc. T[co maintains it principalmasteraccounts at

)< GLB Trading.

26 JURISDICTIoN AND VENI'E

27 9. This Court has jurisdictionoverthis action pursuantto Sections 2l (dXl )i

28 21(dxlX3XA), 2l(e) and 27 ofthe SecuritiesExchangeAct of 1934('ExchangeAct"), 15

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Document1 Filed035/2008 Page4 of 13Case 3:08-cv-00400-US-BLM

I I U.S.C.$$78u(d)(l), 78u(dX3)(A), 78u(e) & 78aa. Defendants have, directly or indirectly, made

) useof the means or instrumentalities of interstate cornmerce,of the mails, or of the facilities of a

nationalsecurities exchange, in connection with the hansactions, acts, practices,and courses of

4 conductalleged in this Complaint.

f 10. Venueis properin this disrict pursuantto Section 27 ofthe Exchange Act, 15\

6 U.S.C.$ 78aa, because the defendants resideandtransactbusinessin thisdistrictand certain of

the hansactions, acts,practices,and courses of conduct constituting violationsof the federal

8 securitieslaws alleged in this Complaint occurredwithin this dishict.

9 GENERAL ALLEGATIoNS

l0 TucotsOoeradons

l l 1 I . Tucodescribesitself on its website as a 'lrivate equity firm" thatprovides

t2 "trading solutions for the active trader." Frederickis Tuco's only ClassA "ownermember"and,

l3 assuch, has exclusive managerialauthorityover Tuco and is vested wiih the sole and exclusive

l + powerto tansact business onTuco's behalf. Frederick alsoactivelyparticipatesin Tuco's day-

to-day activities, controlsall ofTuco's trading and bank accounts, and is the onlyperson

16 authorized to withdraw funds from Tuco's ac,counts,Frederick also controls andmonitors the

t7 dailyrading activity ofTuco's faders and determines each tader's maximum buyingpower.

l8 12. To frade through Tuco, customers contributefunds to Tuoo and sigr Tuco's

l9 Operating Agreement as a "ClassB" mernber, andsign Trader Agreements and Confidentiality

20 Agreements with Tuco. There is no minimum initial capital conhibution amount required by

2 l Tucoor Frederick for a customer to open an account. New traders come fom referrals by

22 Tuco's existing traders or vendors,or through Tuco's website, whichTuco uses to advertise its

day-tradingbrokerageservices.

24 13. As ofDecember 31, 2007, Tuco had 274 haders, wittr 330 sub-accounts.Of

25 those, 186 traders had 229 sub-accountswith positiveequity balances totaling approximately

26 $10.2million. Significantly, 157 of the 229 sub-accounts hadthat had positiveequitybalances

) 1 equitybalancesbelow$25,000,theminimum equity required by NASD day-tradingrules.

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Case 3:08-cv-00400-US-BLM Document1 Filed 035/2008 Page 5 of 13

I 14. As of January 31, 2008, Tuco had 261 traders, with335 sub-accounts.Ofthose,

2 198 traders had 257 sub-accounts totalingapproximately$11.4with positiveequity balances

million. Sipificantly, 159 of the 257 sub-accounts had equity that had positiveequitybalances

4 balancesbelow$25,000,the minimum equity required by NASD day-trading rules.

5 15. Tucopoolsits baders' funds in bank, brokerage and commodity futures accounts

6 in Tuco's name, all of which arecontolled by Frederick, Tuco has three brokerage accounts at

GLB Trading, and Frederick is the registeredrepresentativeon each account. Tuco also allows

8 customersto trade commodity futures through two commodities accounts in T\rco's name which

9 are also controllerl by Frederick. Tuco also maintains two bank accounts, both conbolled.by

10 Frederick,which Tuco uses to receive traders' initial andadditional contibutions, to send

l l withdrawalsor distributionsto traders, and to payTuco'sexpenses.Frederickis the only person

t2 authorized to withdraw funds from Tuco's accounts.

to create for each bader

t4 through which the hader can day-tradesecurities through Tuco's master accounts.All but 1% of

l5 Tuco'sbusinessconsistsof equity hading, and 99% ofthat trading occurs in Tuco'smaster

l6 accountsat GLB Trading. Traders can conduct their hading activities atTuco's six offices

l7 located nationwide, its fwo foreigrr offices,and at a remote location of the customer's choosing.

l8 TucoprovidestradingplatformsoftwareAom severalvendors,which enablesa trader to use his

t9 or her sub-account to placetades throughTuco'smaster accounts. T\rco also uses the hading

20 software to monitor each bader's orofits and losses on a real-time basis and whettrer the hader is

2 l incurring substantial trading losses

22 17. Under Tuco's Oporatingand Trader Agreements, Tucodetermines how much of

23 Tuco'sfunds each tader may use in rading securities and can stop the trader from trading at any

24 point. Fredericksets each trader'sbuyingpowerbased upon the amount of funds in the tader's

25 sub-accountand the hader's trading experience.New haders beginwith 6:1to l0:1 buying

26 power (i.e., a newtrader can use $6to $10ofTuco'sequityto purchasesecuritiesfor each $1in

27 the trader's sub-account). Approximately80% ofTuco's haders have between10;1 and20:1

28 buyingpower,far in excess of the 4:1 buying powermaximum imposed by applicable NASD

16. Tuco uses its own back offio€ system sub-accounts

Case 3:08-cv-00400-ryS-BLM Document1 Filed 035/2008 Page6 of 13

1 and NYSE rules.

z 18. Frederickmonitors how much trading powereachtrader uses by checkingTuco's

J back office systemdaily. Tuco's master accountsat GLB Trading arelimited to 4:1 power. If a

+ master accounts exceeds the 4:1 limit, Tuco receives a margin call from GLB Trading, which

5 ' Tuco satisfies by bonowing funds from third parties.Each week, Tuco borrows andpaysback

6 from$500,000to $2.3million to meet these margin calls.

7 19. Under Tuco's Operating Agreement, the kader is responsible for all of the frading

8 profits and losses in his or her hadingaccount and does not sharein other traders' profits and

9 losses. The OperatingAgreement also states that the hader may withdraw any of the tader's net

l0 tradingprofits. T\rco is required underthe Operating Agreementto adjus! on a daily basis,the

l l amountoffunds in the hader's account by the amount ofthe fader's tradingprofitsandlosses,

t2 net any commissions, expenses, or other chargesthat Tuco may take. If a trader suffers losses in

t t t J excessofhis or her contributions, resultingin a negative equity balance, under the Operating

l4 Agreement,theClass A member(d.e,,Frederick) is solely responsiblo for the negative equity

15 balance,

16 20. Each trader can log onto Tuco's back-office systern and see theactivityin his or

t7 her sub-account. The back office system displays,asof the previousday, the sub-account's

l8 equity and account history (trades,tradebreaks,commissions,fees,deposits,and withdrawals),

l9 andpurportsto represent the balance available to the trader for withdrawalor disbibution.

20 21. Tuco's baders are conducting substantialamountsof day-trading through Tuco's

2 l master accounts at GLB Trading - bothin tenns of the dollar amount of the bades atrd the

22 numberof trades. For example, in December 2007, one trade was worttr $42.7million. The

23 mostrecent monthly accountstatementfor Ttrco's principalmastetaccountis over 10,000 pages,

24 representinghundredsof millions of shares tradedeachmonth.

25 Tuco'sCommissions.Fees and Expenses

26 22, Tuco charges its baders commissionson their securities trades.Frederick

1 1 negotiates with each trader the commissions thatwill becharged but t1'pically sets the

28 commission rate for new traders at $5per 1,000shares traded. Commissions range from $0.20

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Case 3:08-cv-00400-US-BLM Document1 Filed 035/2008 Page7 of 13

t to $8 per I ,000shares haded. Tirco also chargesits traders certain additionalfees,such as for

2 wiring of funds withdrawn from Ttrco, sending withdrawal checks by overnight mail, and for

providingsoftware,stockquotesand news feeds.

4 23. Thetoading software calculates Tuco's commissions, which are then downloaded

5 dailyinto Tuco's back office systern andthendebitedfrom the trader's sub-account.The

6 commissionsarecollectedat GLB Trading's clearing firm, Penson Financial, which also

receivesa copy ofthe commissioncalculationsgeneratedby the trading software. Penson

8 FinancialandGLB Tradingthen subhact from the calculated commissions variousexpensesand

9 fees,andGLB Trading's share of the commission. GLB Tracling then paysthe net commissions

l0 to frederick, which Frederick then depositsinto Tuco's bank accountsto payTuco's expensesor

l l to pay trader withdrawals, or deposits into Tuco's master accounts.

t2 24. Through their tading activity, T[co's &aders havegeneratedsubstantial

commissionsfor Frederick as the registered representativeon the Tuco-GLB Trading.accounts.

t4 FromDecember2006through Octob a 2007, Frederick received approximately $1,l2 million in

l5 net commissions from GLB Trading, of whichmore than 90% has come from fading in Tuco's

l6 accounts.Frederick's commissions skyrocketed to $2.14million in Novenber 2007 alone,(he

t7 increasebeing largely attributableto a new trader, which is itselfa day-hading firm with

18 approximately 1 50 traders.

19 25. Tuco incurs substantial costs that its paysthroughits tansaction-based

20 commissionchargesto its haders, These expenses include the costsassociatedwith purchasing

21 and operating the tradingsoftware and back office systenq salaries,consultingfees,interest

22 charges, travel, websitemaintenanceando{fice expenses. Tircois only able to pay its expenses

) \ using the transaction-based it receives. commissions

24 Tuco's and Frederickts Materirl Misrepresentrtions and Omissions and Tuco's

25 Multi-Million Dollrr Shortfall

26 26. In connection with its solicitation and enrollment ofnew haders, Tucoand

)1 Frederickprovideto each new hader,amongotherthings, a copy ofTuco's Operating

28 Agreement.Eachnew member is required to execute a counterpart signaturepageto the

Case 3:08-cv-00400-ryS"BLM Document1 Filed035/2008 Page I of13

I Operating Agr€ement in order to become a member of Tuco, in which the trader acknowledges

2 receiptof the Operating Agreetnent and agrees to be bound by its terms.

J 27. In the Operating Agreement, Tuco and Frederick represent that they will create a

4 separatezub-accountfor each hader throughwhich the fader can conductday-trading activities.

5 ln the Operating Agreement, Tucoand Frederick firther representthat the profits (andlosses)

6 generatedby each trader within tle hader's sub-account shall be atlocated pursuantto a cortain,

agreedupon'layout percentage."In practice,the agreed upon payoutpercentageis always

8 100%. In other words, Tuco and Frederickagree and representto the trader that 100% of the

9 trader'snetprofitsshall be allocated to the bader for the hader's exclusivebenefit.

10 28. In the Operating Agreement, Tuco and Frederick further representthat Tuco's

11 books shall reflect, among other things, the trader's initial and additionalfunds deposited and the

t2 amount ofthe net trading profitsthat has been credited to the hader. Tuco and Frederick further

l3 representthat the only amounts that shall be debited Aom the bador's sub-accountshall be the

t4 amountofmoney (or property) distributedby T[co to the trader and theamountofany net

l5 trading iosses assessedto the tader.

t6 29. ln the Operating Agreem€nt, Tuco and Frederick flrther represent that Tuco will

t7 maintain true and correct books and records, in which shall be entered all transactions ofTuco,

t8 and all other records necessary, conve'nientor incidental to recording Tirco's business and

l9 affairs,which shall be sufficientto record the allocation ofnet income and net losses and

20 distributionsto traders asprovidedby the Operating Agreement.

2 l 30. In connection with the daily tading activity ofTuco's traders, andto induce

2? Tuco's traders to continuefading with Tuco and to generatecommissionsand other charges for

23 Tuco's brokerage services, Tuco and Frederick make additionalrepresentationsto Tuco's traders

24 througlrthe operation of Tuco's back office system, which kaders can log onto to seetheactivity

t { and current balances in their designatedsub-aocounts.Tlrco'sbackoffioe system displays, as of

26 thepreviousday, the hader's account equity,which is purportedlytheamount of money

27 availableto the tader for tading, distibution or withdrawal.

28 ///

Case3:08-cv-00400-US-BLMDocument1 Filed 035/2008 Page 9 of 13

I 3 L Tuco and Frederick knew, or wererecklessin not knowing, that each of theafore'

2 mentioned material statements w€re falseand misleading, in that the sub-accounts, Ttrco'sbooks

J and records, and Tuco's back offrce system and associated software did not accurately reflect the

4 traders'netequity balances or the actual amount ofmoney available to the trader for distribution

5 or withdrawal.

6 32. lndeed,Tucoand Frederick have misused nnd continue to misuse various amounts

of the faders' net equity to payTuco'sexpenses,to coverother traders' trading losses, and to

8 otherwisemaintain and continue Tuco's opemtions. The Defendants' misuse of the taders'

I funds was neither authorized by, nor disclosedto, Tuco's faders,

10 33. As of Decernber 31,2007, there was approximately a 35% shortfall betweenwhat

l l traders saw whenviewing their sub-accounts on Tuco's back office system and what Tum

t2 actuallyheld for its traders in its accounts. As of December 31, 2007, Tuco and Frederick

representedto its traders that the traders had positivenet equity totaling approximately $10.2

14 million. As of that date, however, Tuco'sbank,brokerageandcommoditiesaccountshadnet

l5 assetsof only approximately $6.59million. Therefore,approximatety$3.62million of the

l6 bader's funds,or about 35%, was unaccounted for.

.t7 34. As of January 31, 2008, there was approximately a 12% shortfall between what

18 traderssawwhen viewing their sub-accountson Tuco's back office system and what Tuco

19 actually held for its taders in its accounts. As ofJanuary 31,2008, Tuco and Frederick

20 representedto its &aders that the fraders had positivenet equity totaling approximately $1 I .4

2 l million. As of that date, however, T\rco's bank, brokerage and commodity futures accounts had

22 netassetsof only approximately $10.05million. Therefore, approximately$1.35million of the

23 trader's funds, or about 12% was unaccounted for.

24 35. Thesemisused funds were used to payTuco'soperatingexpensesandto cover

25 other traders' losses. Tuco's andFrederick'suse ofthose funds was improper and conhary to

26 Tuco's and Frederick's representations setforth in Tuco's Operating Agreemen! in which they

) 1 representedthat haders' net profits would not be used to meetTuco's operating expensesor to

28 cover other traders' hading losses. Needless to say, Tuco and Frederick failed to disclose to

Document1 Filed03/52008Case 3:08-cv-00400-TS-BLM Page 10 of13

I Tuco's taders that their net badingprofits were being usedto meet Tuco's andFrederick's

2 expensesand liabililies and that there were insuf8cient funds in Tuco's accountsto cover all of

3 its haders' net positiveequitybalances.

4 36. Tuco and Frederick are continuing Tuco's operations and allowingtraders to day­

5 trade securities throughTuco'saccounts, Tuco and Frederick are also continuing to solicit new

6 traden, receive deposits from andpaywithdrawals to fiaders, and receive commissions.Tuco

and Frederick are also continuing to make false and misleading statements to traders and

8 continuingto mizuse haders'funds.

I tr'rRsrCLArM FoR RELTEF

10 UNP.EGISTEREDBROKER.DEALER

u VroLATroNsoF SEcrroN 15(a) oF rEE ExcsANcE Acr

t2 (AGAINSTTUCO)

l3 AIDING AND ABETTINGVIoLATIoNS oF SECTI0N IS(a) oT TM EXCEANGEACT

T+ (AcAtNsT FREDERICK)

t5 J t . TheCommissionreallegesandincorporatesby reference paragraphsI through 36

l6 above.

1',7 38. Defendant Tuco, by engaging in the conduct dessribed above, directly or

l8 indirectly,made use of themailsand other means or instrumentalities of interstatecommerceto

l9 effecttransactions in securities,without being registered as a broker or dealerpursuantto Section

20 15(b)ofthe Exchange Act, l5 U.S.C. $ 78o(b),in violation of Section l5(a) ofthe Exchange

71 Act, 15 U.S.C. $ 78o(a).

22 39. Defendant Frederick knowinglyprovidedsubstantial assistance to Ttrco's

23 violationof Section 15(a) ofthe ExchangeAct, 15U,S.C. $78o(a).By engagingin the conduct

. A describedaboveandpursuantto Section 20(e) ofthe Exchange Act, 15 U.S.C.$ ?8(e),

) \ defendant Frederick aidedand abetted defendant Tuco's violations of Section 15(a) of the

26 ExchangeAct, 15 U.S.C.$ 78o(a).

27 40. By engaging in the conduct described above, defendants Tuco and Frederick

28 violated,andunless resfiained andenjoined will continue to violatq Section l5(a) ofthe

Document Filed Page 11 of '13Case 3:08-cv-00400-TS-BLM 1 0352008

1 Exchange Act, 15 U.S.C. $78o(a).

2 SEcoNDCLAIM FoR RELIEF

J FRAuD IN CoNNECTION WITE TEE PURCEASE OR SAI,E OF SECURITIES

4 vrolATroNsoF SEcrroN tb(b) or rur BxCEANGE RULEAcr AND 10b-5 TmREUNDER

) (AcAnsr Tuco ANo FhroEnrcr)

6 41. The Commission reallegesandincorporatesby reference paragaphsI through36

above,

8 42. Thedefendants,andeach ofthem, by engaging in the conduct described above,

9 directly or indirectly, in connection with the purchaseor sale ofa security, by the uso ofmeans

l0 or instrumentalitiesof interstate commerce,of the mails, or of th€ facilitiesof a national

I t securitiesexchange,with scienter:

l2 a. ernployeddevices, schemes, or artifices to defraud;

l3 b. madeuntruestatementsof a material factor omitt€d to state a material

I4 fact necessary in order to make the statements made,in the light of the

15 circumstancesunder which they were made, not misleading; or

16 . c. engaged in acts, practices,or corusesofbusinesswhich operated or would '

t7 operate as a ftaudor deceit upon other persons.

l8 43. .By engagrngin the conduct described above,each ofthe defendants violated, and

l9 unless reshained and enjoined will continue to violate, Section l0(b) of ttre Exchange Act, 15

20 U.S.C.$ 78j(b), and Rule 10b-5 thereunder,l? C.F.R. $240.10b-5.

2I PRAYERFoR RELIET.

22 WHEREFORE,the Commission respectfullyrequests that the Court:

23 I.

24 Iszuefindings of fact and oonclusions oflaw that the dofendantscommittedthe alleged

25 violations.

26 II.

71 Issue orders, in a form consistent with Fed. R, Civ. P. 65(d), temporarily,preliminarily

28 andpermanentlyenjoining defendant Tuco and Frederick and their officers, agents, servants,

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Document Filed031ry008 PageCase3:08-cv-00400-Df-BLM 1 12 of 13

I omployees, and attomeys, and those personsin active concert or participationwith anyof them,

2 who receive actualnoticeofthe order by personalservice or otherwise, and eachofthem, fiom

violating Sections 10O) and l5(a), of the ExchangeAct, l5 U.S.C. $$78jO),78o(a),and Rule

4 10b-5 thereunder, 1? C.F.R. $ 240.10b-5.

5 IIt.

6 Issue in a form consistent with Fed. R. Civ. P. 65, aternporary restraining order and a

preliminaryinjunction fteezing the assets ofdefendantsTuco and Frederickl appointing a

8 receiver over defendant Tuco; prohibitingeach of the defendants from destoyilg documents;

9 and ordering accountings from the defendants.

10 rv. l l Order defendants Tuco and Frederick to disgorge all ill-gotton gainsfrom their illegal

t2 conduc! together with prejudgrnentinter€st thereon

l3 v.

l4 OrderdefendantsTuco and Frederick to paycivil penaltiesunder Section 2l(d)(3) ofthe

l5 ExchangeAct, l5 U.S.C. $ 78u(dX3).

16 vI.

t7 - Retainjurisdiction ofthis action in accordance with theprinciplesof equity andthe

l8 Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and

19 decrees that may be entered, or to entertain any suitable application or motion for additional

20 relief within the jwisdiction of this Court.

2 l VII.

22 Grant such other and further relief asthis Court may determine to be just andnecessary.

23

24 DATED:uar*r f, zooa25 Attomeys for Plaintiff

26 Securitiesand Exchange Commission

27

28

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& DiNaloru!!Acl o 891ASiorl|llrd Ac$ O 740tullwly Lrbo. Ac! d 892EcooooicStlbiurtion Acl

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o|hd sllL Stahrlcr O 440OtrcrCivil

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V, ORIGIN (Plscar'l'x" in On. BoxOnly) to Distlict g l ( J 2 o3 o 4 Rcnatarcd f, 5 [fll#,' D6or

itrtuter udetr dlv..rlly):

VI. CAUSEOF ACTION cEugai. brok€r-deslcr violotions

CHECKIFTHISISA CLASSACTIOI{ CHECKYESonlyit

COMPLAINT: UNDERF.R.C.P,UNDERF.R.C.P,23 JIJRYDEMANDIJIJRYDEMANDI O Y€T ONo23

VIII. RELATEDCASE(S) T['ANY

(Scc iBtructiond): oocxs,NUIaER

RECEIYT# AMOI]NT AIPLYINC IFP MAO, 'I'DCE

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