SEC Obtains Temporary Restraining Oder to Halt Nearly $130 Million Fraud Targeting Indian American Community
- The fraud is allegedly being conducted by Nanban Ventures LLC, its three founders — Gopala Krishnan (aka GK), Manivannan Shanmugam, and Sakthivel Palani Gounder — and three other entities they control.
The Securities and Exchange Commission has obtained a temporary restraining order, asset freeze, and other emergency relief to halt an ongoing fraud targeting the Indian American community that has raised nearly $130 million since April 2021. The fraud is allegedly being conducted by Nanban Ventures LLC, its three founders Gopala Krishnan (aka GK), Manivannan Shanmugam, and Sakthivel Palani Gounder, and three other entities they control.
The SEC’s complaint, unsealed on Oct. 16 in the U.S. District Court for the Eastern District of Texas, alleges that of the total $130 million they raised, “more than $89 million was from 350 investors for investments in purported venture capital funds they managed through Nanban Ventures LLC. “ Additionally, “more than $39 million was from 10 investors that invested directly in the three other entities controlled by them.”
In “a classic Ponzi fashion,” the defendants used investor money “to make fake profit distribution payments of at least $17.8 million, while allegedly siphoning off millions in investors’ funds for themselves,” the SEC complaint alleges. They also misrepresented Krishnan’s expertise and success using his eponymous “GK Strategies” options trading method, the complaint alleges.
In a statement, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement said that the defendants allegedly “engaged in a large-scale affinity fraud that targeted hundreds of investors, largely from the DFW-area Indian American community.” He urged all investors “to confirm the credentials of supposed investment professionals and to view investments that advertise outsized returns skeptically.”
The complaint charges all defendants with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. It also charges the three founders and their company with violating the antifraud provisions. It also seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties from all the defendants, and an order prohibiting the founders from acting as officers or directors of a public company.