Securities and Exchange Commission v. Jt Wallenbrock & Associates Citadel Capital Management Group, Inc., and Larry Toshio Osaki Van Y. Ichinotsubo

At issue is an order entered against parties to a securities pyramid or Ponzi scheme, requiring the principal and his two companies, jointly and severally, to disgorge millions of dollars that the district court found to be ill-gotten gains from their having defrauded numerous investors. The defendants are J.T. Wallen-brock & Associates (“Wallenbrock”) and Citadel Capital Management Group, Inc. (“Citadel”), business entities that were organized and controlled by appellant-defendant Larry Osaki, the managing general partner of Wallenbrock and a 99.5 percent owner of Citadel (collectively “the defendants”). Another appellant-defendant is Van Ichinotsubo, an employee of both companies who solicited investors on their behalf and invested $1.2 million in Wallen-brock. We affirm the district court’s disgorgement order.

I. Factual and Procedural Background

From at least 1997 to October 2003, the defendants raised nearly $253.2 million from thousands of investors through the fraudulent sale of unregistered promissory notes. The defendants misrepresented to investors that they were using the proceeds of the notes, matched by Wallen-brock, to purchase accounts receivable of Malaysian…