The Securities and Exchange Commission (SEC) today charged South Bay Acquisitions, LLC and its principal, John N. Matson of San Diego, California, with defrauding five investors, including some of his former brokerage customers.

According to the SEC’s complaint, between January 2012 and September 2021, Matson and South Bay – which was purportedly formed to seek out investment opportunities – made unregistered offerings of securities and raised more than $1.5 million from five individual investors.

The complaint alleges that Matson, a former registered representative, issued “LLC Bonds” from South Bay to the investors and promised to manage the proceeds as a fiduciary for the investors’ benefit.

According to the complaint, despite those promises, Matson and South Bay instead consistently transferred money from South Bay or otherwise diverted South Bay funds to Matson’s personal account for personal expenses.

The complaint alleges that South Bay also operated as a Ponzi scheme in which investor funds were used to pay promised returns to earlier investors.

The SEC’s complaint, filed in the United States District Court for the Southern District of California, charges Matson and South Bay with violating 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 complaint seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties.