SEC Obtains Final Judgement in Real Estate Offering Fraud Case
On December 1, 2021, the SEC obtained a final judgment against Kirk Sperry and Sperry and Sons Capital Investments LLC in a case of real estate offering fraud. The Bellevue, Washington company was initially charged back in September 2019 with fraudulently raising $125,000 from two investors for a Williston, North Dakota residential real estate project. In the initial charging document, the SEC claims that Kirk Sperry solicited investor funds using false and misleading statements, including claims that the investment would be secured by a first position mortgage on the property in question when in reality a different investor/business partner held first position.
Sperry also claimed that purchase agreements were in place for certain lots, despite the fact that those purchase agreements had been already cancelled. Additionally, the SEC complaint alleges that Sperry and Sons used part of the received investor funds to pay off other investors who were owed money by Sperry and Sons for unrelated real estate projects.
The initial complaint was filed in the U.S. District Court for the Western District of Washington, charging Sperry and Sons with violations of 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. As an individual, Kirk Sperry was charged with violations of Sections 17(a)(1) and 17(a)(3) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and liability for aiding and abetting Sperry and Sons’ violations of Section 17(a)(2) of the Securities Act. In the complaint, the SEC sought civil penalties, disgorgement with prejudgement interest, and permanent injunctive relief.
The U.S. District Court for the Western District of Washington entered a final judgment on the case on December 1st, regarding the monetary relief against Kirk Sperry and Sperry and Sons Capital Investments. This judgment sees Sperry and Sons liable for a total of $284,480 in penalties, including a $125,000 penalty in disgorgement, a $125,000 civil penalty, and $34,480 in prejudgement interest. Kirk Sperry is also personally liable for a $125,000 civil penalty.
This past May, Sperry and Sons and Kirk Sperry agreed to a bifurcated settlement, the terms of which do not require the defendants to deny or admit the SEC’s allegations. In that hearing, Kirk Sperry and Sperry and Sons agreed to the entry of judgments, the consequences of which permanently enjoined them from violating federal antifraud provisions, more specifically 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. Litigation for the SEC was led by Silvana Quintanilla and Sheila O’Callaghan and supervised by Susan LaMarca of the SEC’s San Francisco office.
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