Document1 Filed0352008 Page 1 of 13 - PDF document

1 Document1 Filed0352008 Page 1 of 13 Cas
Document1 Filed0352008 Page 1 of 13 Case3:08-cv-00400-US-BLM ORICINAL I
DONALDW. SEARLES, Ca].BarNo. 135705SearlesD@sec.gov 2
KELLY BOWERS, Cal. Bar No. 164007BowersK@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 Floor8 Los Angeles, Califomia 90036Telephone:(323)965-39989 Facsimile:(323)965-3908 l0 ll
UNITED STATES DISTRICT COURT t2
SOUTHERN DISTRICT O[' CALIFORNIA l3 cv
u 4 00DMsBLM t4
SECURITIESAND EXCHANGE c*"No.,'0g COMMISSION,l5 Co[DLAr{T FoR VIoLATIoNS OF TM ii r6 . Plaintiff, FbpERAL SEcuRrrrFs LAws !. ll 14 vs, II l8
TUQOTRADING, LLC'hnd DOUGLASG. FREDERICK, t9 Defendants. 20 2l 22 23 24 ?{ 26 27 28 1 Pase 3 of 13 Case 3:08-cv-00400-US-BLMDocument Filed 03152008 I have failed to disolose to Tuco's haders that their equity balances are overstatod andthat Tucohavemisused 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 registration7 provisionsof the federal securities laws. By this action, the Commission seeks a temporary8 reshainingorder,prelirninaryandpermanentinjunctive relief, an asset freeze, an accounting, an9 orderpreventingthe destruction of documents, the appoinhnent of a receiver overT\rco, l0 disgorgementwith prejudgnentinterestofthe defendants' ill-gotten gains,and civil penalties. ll II 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 Tucoin 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. 2l 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 -2­ Document1 Filed035/2008 Page4 of 13 Case 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 of4 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 ll 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 2l 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 had that had positiveequitybalances )1 equitybalancesbelow$25,000,theminimum equity required by NASD day-tradingrules. 28 -3­ 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$11.4 with 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

2 ,which Tuco uses to receive traders' ini
,which Tuco uses to receive traders' initial andadditional contibutions, to send ll 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 2l 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 Filed035/2008 Page I of13 I Operating Agr€ement in order to become a member of Tuco, in which the trader acknowledges2 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 a4 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 always8 100%. In other words, Tuco and Frederickagree and representto the trader that 100% of the9 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. 2l 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,whichis 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€refalseand 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 ll 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'sfunds,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 2l 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 trad

3 ers' hading losses. Needless to say, Tuc
ers' hading losses. Needless to say, Tuco and Frederick failed to disclose to Document1 Filed03/52008 Case 3:08-cv-00400-TS-BLM Page 10 of13 I Tuco'staders 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 Jt. 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 '13 Case 3:08-cv-00400-TS-BLM 1 0352008 1 Exchange Act, 15 U.S.C. $78o(a). 2 SEcoNDCLAIM FoR RELIEF J FRAuD IN CoNNECTION WITE TEE PURCEASE OR SAI,E OF SECURITIES4 vrolATroNsoF SEcrroN tb(b) or rur BxCEANGE RULE Acr AND 10b-5 TmREUNDER ) (AcAnsr Tuco ANo FhroEnrcr) 6
41. The Commission reallegesandincorporatesby reference paragaphsI through36 above, 8 42. Thedefendants,andeach ofthem, by engaging in the conduct described above, 9 directly or indirectly, in connection with the purchaseor sale ofa security, by the uso ofmeans l0 or instrumentalitiesof interstate commerce,of the mails, or of th€ facilitiesof a national It securitiesexchange,with scienter: l2 a. ernployeddevices, schemes, or artifices to defraud; l3 b. madeuntruestatementsof a material factor omitt€d to state a material I4 fact necessary in order to make the statements made,in the light of the 15 circumstancesunder which they were made, not misleading; or 16
. c. engaged in acts, practices,or corusesofbusinesswhich operated or would ' t7 operate as a ftaudor deceit upon other persons.l8 43. .By engagrngin the conduct described above,each ofthe defendants violated, andl9 unless reshained and enjoined will continue to violate, Section l0(b) of ttre Exchange Act, 1520 U.S.C.$ 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 alleged25 violations.26 II. 71 Issue orders, in a form consistent with Fed. R, Civ. P. 65(d), temporarily,preliminarily28 andpermanentlyenjoining defendant Tuco and Frederick and their officers, agents, servants, -10­ 'J.' Case3:08-cv-00400-DMS-BLMDocument1 Filed0310412008Page13of 13 sJs {4 (tuv. ll/04) CTVILCOYERSHEET TheJs44civitcovcr3hectcndlhcinformBtionconir.incdh!i!iDD!ithcrrD|rccnoI!uppl.'nrnr!hcflhBMsrrviceofpleadiggs5,io-hirdlpers].siuidWllv bv|oc6lru|.sofcoun'ThisforiLaDDrbvedbvtheJudiciaIconfe'alccoffeUnitcdsidc6insatcrnbif|974,isEquir€dforhi.usoq1tliggt$l;rhccivildockctshcer.(sEEINsriUCTloNs oFTHEFoRM.) ONTfiEREITRSE I. (a) PLAINTIFFS DEFENDANTS 08HAR _q nH R:Eq ' SecuritiesandExchangeCommission TucoTrading,LLCandDouglasG.Fibileiickv .,u-s..0tsTA *- siji'lii.r'trirH;r?rrilc^r.co-uiT t,lf,l.;,,,?iI 1C1 C ofRcaidcnceofFir$ Pbintiff co*ty {inoiaa". otii"r Llnlibi"l},1}"1',u' c thif Dlogo m (b) County Lirr€d (EXCEFTrN U.S.PLAJNIITTCASES) IiI (IN U.S.(IN U.S. PLAINTIFFPLAINTIIT CASESCASES ONLYI ONLY) $ **' AnoN6+t8s' oFTlrE usETTFr'ecnrroN ffiiN?3ii:f e'ornoyso***ifl$ (C) Aflom€?'s (Fim NaIn , Addr€r, ind Tck?lloi€ Nurnlcr) CV 0 4 00 DMSBtM DonaldW.Searles, Btvd.,t lth RoberoA. Tercero,SEC,56?0Wilshire Los CA -323-96s-3998 lI. BASIS OF JURISDICTION Ohc.ar'x"inoftcBo'Only) 5 | U.S.Covctuniln Pl.i itr O 3 Fcdlr.l QrEtiotl (U,S.OovcruEd Not. Porty) tIt. Citiz.nofThir Sl4r DEF Ol lroDorsrcdofP.inclp6:Pb.c O4 04 OF PRINCIPAL PARTIESctrccar "x""x" inin ort BorBor rorPllit!|tr oity) rcr sr oIE forPlantlff rl .td Orl! Bor forDctcrdlni) lH ?Tf nEF ["ffF ol of au.nEsi I! TNt sbl! O 2 U.s.cor,cmrEnt O 4 Divrr'ily Cili".n of Arodtrr $dc 02 O 2 l|Eoryontldarr'PritEipolPlarc Oi O5 Dcfcndlli (Indic{icCitiz.'lhipofPuricainlEn lll) of B|JliIE! ln Anolh€rSlrll Citizai orSrbj.crof! 03 O 3 Fo|lignN.tion o 6 06 O l:0 lEur'nc. PAf,SONALTMURY Pf,ISIONALINIURV 610Alrlulbn 122Appc!128USClst lm Sbl. R!.DpordouEn! O 120Mlrin O 3loAlrplae O 162Pcnor|6lkdury-610olnlr Food& DruB O 42JWitMrwd o al0 Adirnt$ O l30MilLrAc. O 315AirpllrE Prodld Mcrt Mrlpncilc! 525D|u8RIL!!dSciarri 28USClJ7 o ajoBu'r! andBsnHDg O 140Ncgo.ilblclrsnunr Lirbility O !65 P.rloml Injur, -ofPmFry2luscStl o 4r0Comrstc O 150Rccovcryofovap{yrE O 120Aslsult,Lbct& ProdlctLiabilily O 610Lhuor610 Lr*!LhuorLr*! tl {60Dcpondion ' ' O t5t Mcdicuacr O 330Fcd.nl E ploycr!' InjuryPrcduct O 6i0Aidin! R.s!, O 830Prrrtr CoNp OrgrniraliorB O I52ReoYsryof D.fsdM Lilbllily Lisbility O 660Oclupdtioill O 840Tlsd.nEt o 480Cocurllcndit Studc Lolrs O ll0 Marhc PIRSONAL PROIERTY $fdyAlcrlfr o 490Crbl./S6tTV (Ercl. V.tcnru) O Y5 M6rirc Produc!. O 370OhlrFBud o 810SclcnivcS.rvict O 153Rcrovcryofovdplytlnt Lilbiliry O 371Tnilh in Ladhg 6 850Sccuriqr'ConEoditicJ ofViaaNin'rBaEflr3

4 O 350MotorV.hiclc O 380o0|cr PE'3onsl Ei
O 350MotorV.hiclc O 380o0|cr PE'3onsl Eiclu!8. O t60 Slocthold.B' Suii! O 155Mordvcldclc P'op.riyDanuge o 875Culo'norChdl.'s. O l9OOh.r Cortrlcl Produ.tLi.bility O 38JPEDciyDaru8c O ?20LsbodMgrn Rcladon! l?usc!4r0 O 195Comr&tPrcdudLi.bility O 360ohdPc6oul PFd!.llislility O 730L.bo/MSnt RcponinS o 890OfiGtSl'tutoryAdor! & DiNaloru!!Acl o 891ASiorl|llrd Ac$ O 740tullwly Lrbo. Ac! d 892EcooooicStlbiurtion Acl 7!OOlh.rL€tor Litigldon 891 E||vimdnfltd Mrnr|' 0 220Fo|!cl$u! O 4,12ErryloynEd Satrt!nct O 791Eltpl. R.l. IrE, or Dcfcrd&t) tr 89'4E|EF/ Alloc.rhn Act O 230RctllLe!. & Ejc.rdr O 443Houiing/ Hrbd, Cortoll S.ority Acr l7l IXS-Tbid FMty o 89, Ft!.dom of Infomado'l O 2{0 TorisroLlnd Acoo|rUmdrtiong 530&IElal 26USC?Ot O 245TonPrsduclLiabitity O 444Wcl&rc sJJ Dcrli Fclaliy o ttmApFal of FccDrEr,lin lion O 290AllOl|rRcll PmFry [J 445Arr.. eDi$biliti.i. 540M.rdltnut & OtlEr UndcrF4urlAcsst Etr"loynEnt SJoCivilRiSht! Ct 4.{6Arltr. rvDi$biliticc -555PrtuonCordilbn 9J0Condttiorulity of o|hd sllL Stahrlcr O 440OtrcrCivil & Enfoiclnsf oflu{kmcnl Sl.d.r Cl 36t Arb$lod P!!!oml O 6a0RR.& Tru.t o 410R|ltdlcr lnlulnc.d lrd V, ORIGIN (Plscar'l'x" in On. BoxOnly) to Distlict gl (J2 o3 o 4 Rcnatarcd f, 5 [fll#,' D6 or 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 ONo 23 VIII. RELATEDCASE(S) T['ANY (Scc iBtructiond): oocxs,NUIaER RECEIYT# AMOI]NT AIPLYINC IFP MAO,'I'DCE (v 1 Pase 3 of 13 Case 3:08-cv-00400-US-BLMDocument Filed 03152008 I have failed to disolose to Tuco's haders that their equity balances are overstatod andthat Tucohavemisused 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 registration7 provisionsof the federal securities laws. By this action, the Commission seeks a temporary8 reshainingorder,prelirninaryandpermanentinjunctive relief, an asset freeze, an accounting, an9 orderpreventingthe destruction of documents, the appoinhnent of a receiver overT\rco, l0 disgorgementwith prejudgnentinterestofthe defendants' ill-gotten gains,and civil penalties. ll II 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 Tucoin 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. 2l 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 -2­ 1 Pase 3 of 13 Case 3:08-cv-00400-US-BLMDocument Filed 03152008 I have failed to disolose to Tuco's haders that their equity balances are overstatod andthat Tucohavemisused 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 registration7 provisionsof the federal securities laws. By this action, the Commission seeks a temporary8 reshainingorder,prelirninaryandpermanentinjunctive relief, an asset freeze, an accounting, an9 orderpreventingthe destruction of documents, the appoinhnent of a receiver overT\rco, l0 disgorgementwith prejudgnentinterestofthe defendants' ill-gotten gains,and civil penalties. ll II 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 Tucoin 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. 2l 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 -2­ 1 Pase 3 of 13 Case 3:08-cv-00400-US-BLMDocument Filed 03152008 I have failed to disolose to Tuco's haders that their equity balances are overstatod andthat Tucohavemisused 35% ofthe traders'  2 and Frederick approximately equitytopayTuc

5 o's expenses andtocover other traders'
o'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 registration7 provisionsof the federal securities laws. By this action, the Commission seeks a temporary8 reshainingorder,prelirninaryandpermanentinjunctive relief, an asset freeze, an accounting, an9 orderpreventingthe destruction of documents, the appoinhnent of a receiver overT\rco, l0 disgorgementwith prejudgnentinterestofthe defendants' ill-gotten gains,and civil penalties. ll II 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 Tucoin 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. 2l 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 -2­ 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$11.4 with 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 ll 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 2l 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-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$11.4 with 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 ll 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 2l incurring substantial trading losses 22 17.

6 Under Tuco's Oporatingand Trader Agreem
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 Page 6 of 13 1 and NYSE rules. z 18. Frederickmonitors how much trading powereachtrader uses by checking Tuco'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, which5' Tuco satisfies by bonowing funds from third parties.Each week, Tuco borrows and pays back6 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 ll 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 tt tJ 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 2l 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 11 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 -)­ Case 3:08-cv-00400-ryS-BLM Document1 Filed 035/2008 Page 6 of 13 1 and NYSE rules. z 18. Frederickmonitors how much trading powereachtrader uses by checking Tuco'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, which5' Tuco satisfies by bonowing funds from third parties.Each week, Tuco borrows and pays back6 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 ll 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 tt tJ 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 2l 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 11 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 -)­ 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 acknowledges2 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 a4 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 always8 100%. In other words, Tuco and Frederickagree and representto the trader that 100% of the9 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, th

7 e trader's initial and additionalfunds d
e 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. 2l 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,whichis 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€refalseand 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 ll 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'sfunds,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 2l million. As of that date, however, T\rco's bank, brokerage and commodity futures accounts had 22 netassetsof only approximately $10.05million. Therefore, approximately$1.35million of the 23 trader's funds, or about 12% was unaccounted for. 24 35. Thesemisused funds were used to payTuco'soperatingexpensesandto cover 25 other traders' losses. Tuco's andFrederick'suse ofthose funds was improper and conhary to 26 Tuco's and Frederick's representations setforth in Tuco's Operating Agreemen! in which they )1 representedthat haders' net profits would not be used to meetTuco's operating expensesor to 28 cover other traders' hading losses. Needless to say, Tuco and Frederick failed to disclose to 'J.' Case3:08-cv-00400-DMS-BLMDocument1 Filed0310412008Page13of 13 sJs {4 (tuv. ll/04) CTVILCOYERSHEET TheJs44civitcovcr3hectcndlhcinformBtionconir.incdh!i!iDD!ithcrrD|rccnoI!uppl.'nrnr!hcflhBMsrrviceofpleadiggs5,io-hirdlpers].siuidWllv bv|oc6lru|.sofcoun'ThisforiLaDDrbvedbvtheJudiciaIconfe'alccoffeUnitcdsidc6insatcrnbif|974,isEquir€dforhi.usoq1tliggt$l;rhccivildockctshcer.(sEEINsriUCTloNs oFTHEFoRM.) ONTfiEREITRSE I. (a) PLAINTIFFS DEFENDANTS 08HAR _q nH R:Eq ' SecuritiesandExchangeCommission TucoTrading,LLCandDouglasG.Fibileiickv .,u-s..0tsTA *- siji'lii.r'trirH;r?rrilc^r.co-uiT t,lf,l.;,,,?iI 1C1 C ofRcaidcnceofFir$ Pbintiff co*ty {inoiaa". otii"r Llnlibi"l},1}"1',u' c thif Dlogo m (b) County Lirr€d (EXCEFTrN U.S.PLAJNIITTCASES) IiI (IN U.S.(IN U.S. PLAINTIFFPLAINTIIT CASESCASES ONLYI ONLY) $ **' AnoN6+t8s' oFTlrE usETTFr'ecnrroN ffiiN?3ii:f e'ornoyso***ifl$ (C) Aflom€?'s (Fim NaIn , Addr€r, ind Tck?lloi€ Nurnlcr) CV 0 4 00 DMSBtM DonaldW.Searles, Btvd.,t lth RoberoA. Tercero,SEC,56?0Wilshire Los CA -323-96s-3998 lI. BASIS OF JURISDICTION Ohc.ar'x"inoftcBo'Only) 5 | U.S.Covctuniln Pl.i itr O 3 Fcdlr.l QrEtiotl (U,S.OovcruEd Not. Porty) tIt. Citiz.nofThir Sl4r DEF Ol lroDorsrcdofP.inclp6:Pb.c O4 04 OF PRINCIPAL PARTIESctrccar "x""x" inin ort BorBor rorPllit!|tr oity) rcr sr oIE forPlantlff rl .td Orl! Bor forDctcrdlni) lH ?Tf nEF ["ffF ol of au.nEsi I! TNt sbl! O 2 U.s.cor,cmrEnt O 4 Divrr'ily Cili".n of Arodtrr $dc 02 O 2 l|Eoryontldarr'PritEipolPlarc Oi O5 Dcfcndlli (Indic{icCitiz.'lhipofPuricainlEn lll) of B|JliIE! ln Anolh€rSlrll Citizai orSrbj.crof! 03 O 3 Fo|lignN.tion o 6 06 O l:0 lEur'nc. PAf,SONALTMURY Pf,ISIONALINIURV 610Alrlulbn 122Appc!128USClst lm Sbl. R!.DpordouEn! O 120Mlrin O 3loAlrplae O 162Pcnor|6lkdury-610olnlr Food& DruB O 42JWitMrwd o al0 Adirnt$ O l30MilLrAc. O 315AirpllrE Prodld Mcrt Mrlpncilc! 525D|u8RIL!!dSciarri 28USClJ7 o ajoBu'r! andBsnHDg O 140Ncgo.ilblclrsnunr Lirbility O !65 P.rloml Injur, -ofPmFry2luscStl o 4r0Comrstc O 150Rccovcryofovap{yrE O 120Aslsult,Lbct& ProdlctLiabilily O 610Lhuor610 Lr*!LhuorLr*! tl {60Dcpondion ' ' O t5t Mcdicuacr O 330Fcd.nl E ploycr!' InjuryPrcduct O 6i0Aidin! R.s!, O 830Prrrtr CoNp OrgrniraliorB O I52ReoYsryof D.fsdM Lilbllily Lisbility O 660Oclupdtioill O 840Tlsd.nEt o 480Cocurllcndit Studc Lolrs O ll0 Marhc PIRSONAL PROIERTY $fdyAlcrlfr o 490Crbl./S6tTV (Ercl. V.tcnru) O Y5 M6rirc Produc!. O 370OhlrFBud o 810SclcnivcS.rvict O 153Rcrovcryofovdplytlnt Lilbiliry O 371Tnilh in Ladhg 6 850Sccuriqr'ConEoditic

8 J ofViaaNin'rBaEflr3 O 350MotorV.hiclc O
J ofViaaNin'rBaEflr3 O 350MotorV.hiclc O 380o0|cr PE'3onsl Eiclu!8. O t60 Slocthold.B' Suii! O 155Mordvcldclc P'op.riyDanuge o 875Culo'norChdl.'s. O l9OOh.r Cortrlcl Produ.tLi.bility O 38JPEDciyDaru8c O ?20LsbodMgrn Rcladon! l?usc!4r0 O 195Comr&tPrcdudLi.bility O 360ohdPc6oul PFd!.llislility O 730L.bo/MSnt RcponinS o 890OfiGtSl'tutoryAdor! & DiNaloru!!Acl o 891ASiorl|llrd Ac$ O 740tullwly Lrbo. Ac! d 892EcooooicStlbiurtion Acl 7!OOlh.rL€tor Litigldon 891 E||vimdnfltd Mrnr|' 0 220Fo|!cl$u! O 4,12ErryloynEd Satrt!nct O 791Eltpl. R.l. IrE, or Dcfcrd&t) tr 89'4E|EF/ Alloc.rhn Act O 230RctllLe!. & Ejc.rdr O 443Houiing/ Hrbd, Cortoll S.ority Acr l7l IXS-Tbid FMty o 89, Ft!.dom of Infomado'l O 2{0 TorisroLlnd Acoo|rUmdrtiong 530&IElal 26USC?Ot O 245TonPrsduclLiabitity O 444Wcl&rc sJJ Dcrli Fclaliy o ttmApFal of FccDrEr,lin lion O 290AllOl|rRcll PmFry [J 445Arr.. eDi$biliti.i. 540M.rdltnut & OtlEr UndcrF4urlAcsst Etr"loynEnt SJoCivilRiSht! Ct 4.{6Arltr. rvDi$biliticc -555PrtuonCordilbn 9J0Condttiorulity of o|hd sllL Stahrlcr O 440OtrcrCivil & Enfoiclnsf oflu{kmcnl Sl.d.r Cl 36t Arb$lod P!!!oml O 6a0RR.& Tru.t o 410R|ltdlcr lnlulnc.d lrd V, ORIGIN (Plscar'l'x" in On. BoxOnly) to Distlict gl (J2 o3 o 4 Rcnatarcd f, 5 [fll#,' D6 or 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 ONo 23 VIII. RELATEDCASE(S) T['ANY (Scc iBtructiond): oocxs,NUIaER RECEIYT# AMOI]NT AIPLYINC IFP MAO,'I'DCE (v 'J.' Case3:08-cv-00400-DMS-BLMDocument1 Filed0310412008Page13of 13 sJs {4 (tuv. ll/04) CTVILCOYERSHEET TheJs44civitcovcr3hectcndlhcinformBtionconir.incdh!i!iDD!ithcrrD|rccnoI!uppl.'nrnr!hcflhBMsrrviceofpleadiggs5,io-hirdlpers].siuidWllv bv|oc6lru|.sofcoun'ThisforiLaDDrbvedbvtheJudiciaIconfe'alccoffeUnitcdsidc6insatcrnbif|974,isEquir€dforhi.usoq1tliggt$l;rhccivildockctshcer.(sEEINsriUCTloNs oFTHEFoRM.) ONTfiEREITRSE I. (a) PLAINTIFFS DEFENDANTS 08HAR _q nH R:Eq ' SecuritiesandExchangeCommission TucoTrading,LLCandDouglasG.Fibileiickv .,u-s..0tsTA *- siji'lii.r'trirH;r?rrilc^r.co-uiT t,lf,l.;,,,?iI 1C1 C ofRcaidcnceofFir$ Pbintiff co*ty {inoiaa". otii"r Llnlibi"l},1}"1',u' c thif Dlogo m (b) County Lirr€d (EXCEFTrN U.S.PLAJNIITTCASES) IiI (IN U.S.(IN U.S. PLAINTIFFPLAINTIIT CASESCASES ONLYI ONLY) $ **' AnoN6+t8s' oFTlrE usETTFr'ecnrroN ffiiN?3ii:f e'ornoyso***ifl$ (C) Aflom€?'s (Fim NaIn , Addr€r, ind Tck?lloi€ Nurnlcr) CV 0 4 00 DMSBtM DonaldW.Searles, Btvd.,t lth RoberoA. Tercero,SEC,56?0Wilshire Los CA -323-96s-3998 lI. BASIS OF JURISDICTION Ohc.ar'x"inoftcBo'Only) 5 | U.S.Covctuniln Pl.i itr O 3 Fcdlr.l QrEtiotl (U,S.OovcruEd Not. Porty) tIt. Citiz.nofThir Sl4r DEF Ol lroDorsrcdofP.inclp6:Pb.c O4 04 OF PRINCIPAL PARTIESctrccar "x""x" inin ort BorBor rorPllit!|tr oity) rcr sr oIE forPlantlff rl .td Orl! Bor forDctcrdlni) lH ?Tf nEF ["ffF ol of au.nEsi I! TNt sbl! O 2 U.s.cor,cmrEnt O 4 Divrr'ily Cili".n of Arodtrr $dc 02 O 2 l|Eoryontldarr'PritEipolPlarc Oi O5 Dcfcndlli (Indic{icCitiz.'lhipofPuricainlEn lll) of B|JliIE! ln Anolh€rSlrll Citizai orSrbj.crof! 03 O 3 Fo|lignN.tion o 6 06 O l:0 lEur'nc. PAf,SONALTMURY Pf,ISIONALINIURV 610Alrlulbn 122Appc!128USClst lm Sbl. R!.DpordouEn! O 120Mlrin O 3loAlrplae O 162Pcnor|6lkdury-610olnlr Food& DruB O 42JWitMrwd o al0 Adirnt$ O l30MilLrAc. O 315AirpllrE Prodld Mcrt Mrlpncilc! 525D|u8RIL!!dSciarri 28USClJ7 o ajoBu'r! andBsnHDg O 140Ncgo.ilblclrsnunr Lirbility O !65 P.rloml Injur, -ofPmFry2luscStl o 4r0Comrstc O 150Rccovcryofovap{yrE O 120Aslsult,Lbct& ProdlctLiabilily O 610Lhuor610 Lr*!LhuorLr*! tl {60Dcpondion ' ' O t5t Mcdicuacr O 330Fcd.nl E ploycr!' InjuryPrcduct O 6i0Aidin! R.s!, O 830Prrrtr CoNp OrgrniraliorB O I52ReoYsryof D.fsdM Lilbllily Lisbility O 660Oclupdtioill O 840Tlsd.nEt o 480Cocurllcndit Studc Lolrs O ll0 Marhc PIRSONAL PROIERTY $fdyAlcrlfr o 490Crbl./S6tTV (Ercl. V.tcnru) O Y5 M6rirc Produc!. O 370OhlrFBud o 810SclcnivcS.rvict O 153Rcrovcryofovdplytlnt Lilbiliry O 371Tnilh in Ladhg 6 850Sccuriqr'ConEoditicJ ofViaaNin'rBaEflr3 O 350MotorV.hiclc O 380o0|cr PE'3onsl Eiclu!8. O t60 Slocthold.B' Suii! O 155Mordvcldclc P'op.riyDanuge o 875Culo'norChdl.'s. O l9OOh.r Cortrlcl Produ.tLi.bility O 38JPEDciyDaru8c O ?20LsbodMgrn Rcladon! l?usc!4r0 O 195Comr&tPrcdudLi.bility O 360ohdPc6oul PFd!.llislility O 730L.bo/MSnt RcponinS o 890OfiGtSl'tutoryAdor! & DiNaloru!!Acl o 891ASiorl|llrd Ac$ O 740tullwly Lrbo. Ac! d 892EcooooicStlbiurtion Acl 7!OOlh.rL€tor Litigldon 891 E||vimdnfltd Mrnr|' 0 220Fo|!cl$u! O 4,12ErryloynEd Satrt!nct O 791Eltpl. R.l. IrE, or Dcfcrd&t) tr 89'4E|EF/ Alloc.rhn Act O 230RctllLe!. & Ejc.rdr O 443Houiing/ Hrbd, Cortoll S.ority Acr l7l IXS-Tbid FMty o 89, Ft!.dom of Infomado'l O 2{0 TorisroLlnd Acoo|rUmdrtiong 530&IElal 26USC?Ot O 245TonPrsduclLiabitity O 444Wcl&rc sJJ Dcrli Fclaliy o ttmApFal of FccDrEr,lin lion O 290AllOl|rRcll PmFry [J 445Arr.. eDi$biliti.i. 540M.rdltnut & OtlEr UndcrF4urlAcsst Etr"loynEnt SJoCivilRiSht! Ct 4.{6Arltr. rvDi$biliticc -555PrtuonCordilbn 9J0Condttiorulity of o|hd sllL Stahrlcr O 440OtrcrCivil & Enfoiclnsf oflu{kmcnl Sl.d.r Cl 36t Arb$lod P!!!oml O 6a0RR.& Tru.t o 410R|ltdlcr lnlulnc.d lrd V, ORIGIN (Plscar'l'x" in On. BoxOnly) to Distlict gl (J2 o3 o 4 Rcnatarcd f, 5 [fll#,' D6 or 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 ONo 23 VIII. RELATEDCASE(S) T['ANY (Scc iBtructiond): oocxs,NUIaER RECEIYT# AMOI]NT AIPLYINC IFP MAO,'I'DCE (v 'J.' Case3:08-cv-00400-DMS-BLMDocument1 Filed0310412008Page13of 13 sJs {4 (tuv. ll/04) CTVILCOYERSHEET TheJs44civitcovcr3hectcndlhcinformBtionconir.incdh!i!iDD!ithcrrD|rccnoI!uppl.'nrnr!hcflhBMsrrviceofpleadiggs5,io-hirdlpers].siuidWllv bv|oc6lru|.sofcoun'ThisforiLaDDrbvedbvtheJudiciaIconfe'alccoffeUnitcdsidc6insatcrnbif|974,isEquir€dforhi.usoq1tliggt$l;rhccivildockctshcer.(sEEINsriUCTloNs oFTHEFoRM.) ONTfiEREITRSE I. (a) PLAINTIFFS DEFENDANTS 08HAR _q nH R:Eq ' SecuritiesandExchangeCommission TucoTrading,LLCandDouglasG.Fibileiickv .,u-s..0tsTA *- siji'lii.r'trirH;r?rrilc^r.co-uiT t,lf,l.;,,,?iI 1C1 C ofRcaidcnceofFir$ Pbintiff co*ty {inoiaa". otii"r Llnlibi"l},1}"1',u' c thif Dlogo m (b) County Lirr€d (

9 EXCEFTrN U.S.PLAJNIITTCASES) IiI (IN U.
EXCEFTrN U.S.PLAJNIITTCASES) IiI (IN U.S.(IN U.S. PLAINTIFFPLAINTIIT CASESCASES ONLYI ONLY) $ **' AnoN6+t8s' oFTlrE usETTFr'ecnrroN ffiiN?3ii:f e'ornoyso***ifl$ (C) Aflom€?'s (Fim NaIn , Addr€r, ind Tck?lloi€ Nurnlcr) CV 0 4 00 DMSBtM DonaldW.Searles, Btvd.,t lth RoberoA. Tercero,SEC,56?0Wilshire Los CA -323-96s-3998 lI. BASIS OF JURISDICTION Ohc.ar'x"inoftcBo'Only) 5 | U.S.Covctuniln Pl.i itr O 3 Fcdlr.l QrEtiotl (U,S.OovcruEd Not. Porty) tIt. Citiz.nofThir Sl4r DEF Ol lroDorsrcdofP.inclp6:Pb.c O4 04 OF PRINCIPAL PARTIESctrccar "x""x" inin ort BorBor rorPllit!|tr oity) rcr sr oIE forPlantlff rl .td Orl! Bor forDctcrdlni) lH ?Tf nEF ["ffF ol of au.nEsi I! TNt sbl! O 2 U.s.cor,cmrEnt O 4 Divrr'ily Cili".n of Arodtrr $dc 02 O 2 l|Eoryontldarr'PritEipolPlarc Oi O5 Dcfcndlli (Indic{icCitiz.'lhipofPuricainlEn lll) of B|JliIE! ln Anolh€rSlrll Citizai orSrbj.crof! 03 O 3 Fo|lignN.tion o 6 06 O l:0 lEur'nc. PAf,SONALTMURY Pf,ISIONALINIURV 610Alrlulbn 122Appc!128USClst lm Sbl. R!.DpordouEn! O 120Mlrin O 3loAlrplae O 162Pcnor|6lkdury-610olnlr Food& DruB O 42JWitMrwd o al0 Adirnt$ O l30MilLrAc. O 315AirpllrE Prodld Mcrt Mrlpncilc! 525D|u8RIL!!dSciarri 28USClJ7 o ajoBu'r! andBsnHDg O 140Ncgo.ilblclrsnunr Lirbility O !65 P.rloml Injur, -ofPmFry2luscStl o 4r0Comrstc O 150Rccovcryofovap{yrE O 120Aslsult,Lbct& ProdlctLiabilily O 610Lhuor610 Lr*!LhuorLr*! tl {60Dcpondion ' ' O t5t Mcdicuacr O 330Fcd.nl E ploycr!' InjuryPrcduct O 6i0Aidin! R.s!, O 830Prrrtr CoNp OrgrniraliorB O I52ReoYsryof D.fsdM Lilbllily Lisbility O 660Oclupdtioill O 840Tlsd.nEt o 480Cocurllcndit Studc Lolrs O ll0 Marhc PIRSONAL PROIERTY $fdyAlcrlfr o 490Crbl./S6tTV (Ercl. V.tcnru) O Y5 M6rirc Produc!. O 370OhlrFBud o 810SclcnivcS.rvict O 153Rcrovcryofovdplytlnt Lilbiliry O 371Tnilh in Ladhg 6 850Sccuriqr'ConEoditicJ ofViaaNin'rBaEflr3 O 350MotorV.hiclc O 380o0|cr PE'3onsl Eiclu!8. O t60 Slocthold.B' Suii! O 155Mordvcldclc P'op.riyDanuge o 875Culo'norChdl.'s. O l9OOh.r Cortrlcl Produ.tLi.bility O 38JPEDciyDaru8c O ?20LsbodMgrn Rcladon! l?usc!4r0 O 195Comr&tPrcdudLi.bility O 360ohdPc6oul PFd!.llislility O 730L.bo/MSnt RcponinS o 890OfiGtSl'tutoryAdor! & DiNaloru!!Acl o 891ASiorl|llrd Ac$ O 740tullwly Lrbo. Ac! d 892EcooooicStlbiurtion Acl 7!OOlh.rL€tor Litigldon 891 E||vimdnfltd Mrnr|' 0 220Fo|!cl$u! O 4,12ErryloynEd Satrt!nct O 791Eltpl. R.l. IrE, or Dcfcrd&t) tr 89'4E|EF/ Alloc.rhn Act O 230RctllLe!. & Ejc.rdr O 443Houiing/ Hrbd, Cortoll S.ority Acr l7l IXS-Tbid FMty o 89, Ft!.dom of Infomado'l O 2{0 TorisroLlnd Acoo|rUmdrtiong 530&IElal 26USC?Ot O 245TonPrsduclLiabitity O 444Wcl&rc sJJ Dcrli Fclaliy o ttmApFal of FccDrEr,lin lion O 290AllOl|rRcll PmFry [J 445Arr.. eDi$biliti.i. 540M.rdltnut & OtlEr UndcrF4urlAcsst Etr"loynEnt SJoCivilRiSht! Ct 4.{6Arltr. rvDi$biliticc -555PrtuonCordilbn 9J0Condttiorulity of o|hd sllL Stahrlcr O 440OtrcrCivil & Enfoiclnsf oflu{kmcnl Sl.d.r Cl 36t Arb$lod P!!!oml O 6a0RR.& Tru.t o 410R|ltdlcr lnlulnc.d lrd V, ORIGIN (Plscar'l'x" in On. BoxOnly) to Distlict gl (J2 o3 o 4 Rcnatarcd f, 5 [fll#,' D6 or 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 ONo 23 VIII. RELATEDCASE(S) T['ANY (Scc iBtructiond): oocxs,NUIaER RECEIYT# AMOI]NT AIPLYINC IFP MAO,'I'DCE (v 'J.' Case3:08-cv-00400-DMS-BLMDocument1 Filed0310412008Page13of 13 sJs {4 (tuv. ll/04) CTVILCOYERSHEET TheJs44civitcovcr3hectcndlhcinformBtionconir.incdh!i!iDD!ithcrrD|rccnoI!uppl.'nrnr!hcflhBMsrrviceofpleadiggs5,io-hirdlpers].siuidWllv bv|oc6lru|.sofcoun'ThisforiLaDDrbvedbvtheJudiciaIconfe'alccoffeUnitcdsidc6insatcrnbif|974,isEquir€dforhi.usoq1tliggt$l;rhccivildockctshcer.(sEEINsriUCTloNs oFTHEFoRM.) ONTfiEREITRSE I. (a) PLAINTIFFS DEFENDANTS 08HAR _q nH R:Eq ' SecuritiesandExchangeCommission TucoTrading,LLCandDouglasG.Fibileiickv .,u-s..0tsTA *- siji'lii.r'trirH;r?rrilc^r.co-uiT t,lf,l.;,,,?iI 1C1 C ofRcaidcnceofFir$ Pbintiff co*ty {inoiaa". otii"r Llnlibi"l},1}"1',u' c thif Dlogo m (b) County Lirr€d (EXCEFTrN U.S.PLAJNIITTCASES) IiI (IN U.S.(IN U.S. PLAINTIFFPLAINTIIT CASESCASES ONLYI ONLY) $ **' AnoN6+t8s' oFTlrE usETTFr'ecnrroN ffiiN?3ii:f e'ornoyso***ifl$ (C) Aflom€?'s (Fim NaIn , Addr€r, ind Tck?lloi€ Nurnlcr) CV 0 4 00 DMSBtM DonaldW.Searles, Btvd.,t lth RoberoA. Tercero,SEC,56?0Wilshire Los CA -323-96s-3998 lI. BASIS OF JURISDICTION Ohc.ar'x"inoftcBo'Only) 5 | U.S.Covctuniln Pl.i itr O 3 Fcdlr.l QrEtiotl (U,S.OovcruEd Not. Porty) tIt. Citiz.nofThir Sl4r DEF Ol lroDorsrcdofP.inclp6:Pb.c O4 04 OF PRINCIPAL PARTIESctrccar "x""x" inin ort BorBor rorPllit!|tr oity) rcr sr oIE forPlantlff rl .td Orl! Bor forDctcrdlni) lH ?Tf nEF ["ffF ol of au.nEsi I! TNt sbl! O 2 U.s.cor,cmrEnt O 4 Divrr'ily Cili".n of Arodtrr $dc 02 O 2 l|Eoryontldarr'PritEipolPlarc Oi O5 Dcfcndlli (Indic{icCitiz.'lhipofPuricainlEn lll) of B|JliIE! ln Anolh€rSlrll Citizai orSrbj.crof! 03 O 3 Fo|lignN.tion o 6 06 O l:0 lEur'nc. PAf,SONALTMURY Pf,ISIONALINIURV 610Alrlulbn 122Appc!128USClst lm Sbl. R!.DpordouEn! O 120Mlrin O 3loAlrplae O 162Pcnor|6lkdury-610olnlr Food& DruB O 42JWitMrwd o al0 Adirnt$ O l30MilLrAc. O 315AirpllrE Prodld Mcrt Mrlpncilc! 525D|u8RIL!!dSciarri 28USClJ7 o ajoBu'r! andBsnHDg O 140Ncgo.ilblclrsnunr Lirbility O !65 P.rloml Injur, -ofPmFry2luscStl o 4r0Comrstc O 150Rccovcryofovap{yrE O 120Aslsult,Lbct& ProdlctLiabilily O 610Lhuor610 Lr*!LhuorLr*! tl {60Dcpondion ' ' O t5t Mcdicuacr O 330Fcd.nl E ploycr!' InjuryPrcduct O 6i0Aidin! R.s!, O 830Prrrtr CoNp OrgrniraliorB O I52ReoYsryof D.fsdM Lilbllily Lisbility O 660Oclupdtioill O 840Tlsd.nEt o 480Cocurllcndit Studc Lolrs O ll0 Marhc PIRSONAL PROIERTY $fdyAlcrlfr o 490Crbl./S6tTV (Ercl. V.tcnru) O Y5 M6rirc Produc!. O 370OhlrFBud o 810SclcnivcS.rvict O 153Rcrovcryofovdplytlnt Lilbiliry O 371Tnilh in Ladhg 6 850Sccuriqr'ConEoditicJ ofViaaNin'rBaEflr3 O 350MotorV.hiclc O 380o0|cr PE'3onsl Eiclu!8. O t60 Slocthold.B' Suii! O 155Mordvcldclc P'op.riyDanuge o 875Culo'norChdl.'s. O l9OOh.r Cortrlcl Produ.tLi.bility O 38JPEDciyDaru8c O ?20LsbodMgrn Rcladon! l?usc!4r0 O 195Comr&tPrcdudLi.bility O 360ohdPc6oul PFd!.llislility O 730L.bo/MSnt RcponinS o 890OfiGtSl'tutoryAdor! & DiNaloru!!Acl o 891ASiorl|llrd Ac$ O 740tullwly Lrbo. Ac! d 892EcooooicStlbiurtion Acl 7!OOlh.rL€tor Litigldon 891

10 E||vimdnfltd Mrnr|' 0 220Fo|!cl$u! O 4,
E||vimdnfltd Mrnr|' 0 220Fo|!cl$u! O 4,12ErryloynEd Satrt!nct O 791Eltpl. R.l. IrE, or Dcfcrd&t) tr 89'4E|EF/ Alloc.rhn Act O 230RctllLe!. & Ejc.rdr O 443Houiing/ Hrbd, Cortoll S.ority Acr l7l IXS-Tbid FMty o 89, Ft!.dom of Infomado'l O 2{0 TorisroLlnd Acoo|rUmdrtiong 530&IElal 26USC?Ot O 245TonPrsduclLiabitity O 444Wcl&rc sJJ Dcrli Fclaliy o ttmApFal of FccDrEr,lin lion O 290AllOl|rRcll PmFry [J 445Arr.. eDi$biliti.i. 540M.rdltnut & OtlEr UndcrF4urlAcsst Etr"loynEnt SJoCivilRiSht! Ct 4.{6Arltr. rvDi$biliticc -555PrtuonCordilbn 9J0Condttiorulity of o|hd sllL Stahrlcr O 440OtrcrCivil & Enfoiclnsf oflu{kmcnl Sl.d.r Cl 36t Arb$lod P!!!oml O 6a0RR.& Tru.t o 410R|ltdlcr lnlulnc.d lrd V, ORIGIN (Plscar'l'x" in On. BoxOnly) to Distlict gl (J2 o3 o 4 Rcnatarcd f, 5 [fll#,' D6 or itrtuter udetr dlv..rlly): VI. CAUSEOF ACTION cEugai . brok€r-deslcr violotions CHECKIFTHISISA CLASSACTIOI{ CHECKYESonlyit COMPLAINT: UNDERF.R.C.P,UNDERF.R.C.P,23 JIJRYDEMANDIJIJRYDEMANDI O Y€T ONo 23 VIII. RELATEDCASE(S) T['ANY (Scc iBtructiond): oocxs,NUIaER RECEIYT# AMOI]NT AIPLYINC IFP MAO,'I'DCE (v 'J.' Case3:08-cv-00400-DMS-BLMDocument1 Filed0310412008Page13of 13 sJs {4 (tuv. ll/04) CTVILCOYERSHEET TheJs44civitcovcr3hectcndlhcinformBtionconir.incdh!i!iDD!ithcrrD|rccnoI!uppl.'nrnr!hcflhBMsrrviceofpleadiggs5,io-hirdlpers].siuidWllv bv|oc6lru|.sofcoun'ThisforiLaDDrbvedbvtheJudiciaIconfe'alccoffeUnitcdsidc6insatcrnbif|974,isEquir€dforhi.usoq1tliggt$l;rhccivildockctshcer.(sEEINsriUCTloNs oFTHEFoRM.) ONTfiEREITRSE I. (a) PLAINTIFFS DEFENDANTS 08HAR _q nH R:Eq ' SecuritiesandExchangeCommission TucoTrading,LLCandDouglasG.Fibileiickv .,u-s..0tsTA *- siji'lii.r'trirH;r?rrilc^r.co-uiT t,lf,l.;,,,?iI 1C1 C ofRcaidcnceofFir$ Pbintiff co*ty {inoiaa". otii"r Llnlibi"l},1}"1',u' c thif Dlogo m (b) County Lirr€d (EXCEFTrN U.S.PLAJNIITTCASES) IiI (IN U.S.(IN U.S. PLAINTIFFPLAINTIIT CASESCASES ONLYI ONLY) $ **' AnoN6+t8s' oFTlrE usETTFr'ecnrroN ffiiN?3ii:f e'ornoyso***ifl$ (C) Aflom€?'s (Fim NaIn , Addr€r, ind Tck?lloi€ Nurnlcr) CV 0 4 00 DMSBtM DonaldW.Searles, Btvd.,t lth RoberoA. Tercero,SEC,56?0Wilshire Los CA -323-96s-3998 lI. BASIS OF JURISDICTION Ohc.ar'x"inoftcBo'Only) 5 | U.S.Covctuniln Pl.i itr O 3 Fcdlr.l QrEtiotl (U,S.OovcruEd Not. Porty) tIt. Citiz.nofThir Sl4r DEF Ol lroDorsrcdofP.inclp6:Pb.c O4 04 OF PRINCIPAL PARTIESctrccar "x""x" inin ort BorBor rorPllit!|tr oity) rcr sr oIE forPlantlff rl .td Orl! Bor forDctcrdlni) lH ?Tf nEF ["ffF ol of au.nEsi I! TNt sbl! O 2 U.s.cor,cmrEnt O 4 Divrr'ily Cili".n of Arodtrr $dc 02 O 2 l|Eoryontldarr'PritEipolPlarc Oi O5 Dcfcndlli (Indic{icCitiz.'lhipofPuricainlEn lll) of B|JliIE! ln Anolh€rSlrll Citizai orSrbj.crof! 03 O 3 Fo|lignN.tion o 6 06 O l:0 lEur'nc. PAf,SONALTMURY Pf,ISIONALINIURV 610Alrlulbn 122Appc!128USClst lm Sbl. R!.DpordouEn! O 120Mlrin O 3loAlrplae O 162Pcnor|6lkdury-610olnlr Food& DruB O 42JWitMrwd o al0 Adirnt$ O l30MilLrAc. O 315AirpllrE Prodld Mcrt Mrlpncilc! 525D|u8RIL!!dSciarri 28USClJ7 o ajoBu'r! andBsnHDg O 140Ncgo.ilblclrsnunr Lirbility O !65 P.rloml Injur, -ofPmFry2luscStl o 4r0Comrstc O 150Rccovcryofovap{yrE O 120Aslsult,Lbct& ProdlctLiabilily O 610Lhuor610 Lr*!LhuorLr*! tl {60Dcpondion ' ' O t5t Mcdicuacr O 330Fcd.nl E ploycr!' InjuryPrcduct O 6i0Aidin! R.s!, O 830Prrrtr CoNp OrgrniraliorB O I52ReoYsryof D.fsdM Lilbllily Lisbility O 660Oclupdtioill O 840Tlsd.nEt o 480Cocurllcndit Studc Lolrs O ll0 Marhc PIRSONAL PROIERTY $fdyAlcrlfr o 490Crbl./S6tTV (Ercl. V.tcnru) O Y5 M6rirc Produc!. O 370OhlrFBud o 810SclcnivcS.rvict O 153Rcrovcryofovdplytlnt Lilbiliry O 371Tnilh in Ladhg 6 850Sccuriqr'ConEoditicJ ofViaaNin'rBaEflr3 O 350MotorV.hiclc O 380o0|cr PE'3onsl Eiclu!8. O t60 Slocthold.B' Suii! O 155Mordvcldclc P'op.riyDanuge o 875Culo'norChdl.'s. O l9OOh.r Cortrlcl Produ.tLi.bility O 38JPEDciyDaru8c O ?20LsbodMgrn Rcladon! l?usc!4r0 O 195Comr&tPrcdudLi.bility O 360ohdPc6oul PFd!.llislility O 730L.bo/MSnt RcponinS o 890OfiGtSl'tutoryAdor! & DiNaloru!!Acl o 891ASiorl|llrd Ac$ O 740tullwly Lrbo. Ac! d 892EcooooicStlbiurtion Acl 7!OOlh.rL€tor Litigldon 891 E||vimdnfltd Mrnr|' 0 220Fo|!cl$u! O 4,12ErryloynEd Satrt!nct O 791Eltpl. R.l. IrE, or Dcfcrd&t) tr 89'4E|EF/ Alloc.rhn Act O 230RctllLe!. & Ejc.rdr O 443Houiing/ Hrbd, Cortoll S.ority Acr l7l IXS-Tbid FMty o 89, Ft!.dom of Infomado'l O 2{0 TorisroLlnd Acoo|rUmdrtiong 530&IElal 26USC?Ot O 245TonPrsduclLiabitity O 444Wcl&rc sJJ Dcrli Fclaliy o ttmApFal of FccDrEr,lin lion O 290AllOl|rRcll PmFry [J 445Arr.. eDi$biliti.i. 540M.rdltnut & OtlEr UndcrF4urlAcsst Etr"loynEnt SJoCivilRiSht! Ct 4.{6Arltr. rvDi$biliticc -555PrtuonCordilbn 9J0Condttiorulity of o|hd sllL Stahrlcr O 440OtrcrCivil & Enfoiclnsf oflu{kmcnl Sl.d.r Cl 36t Arb$lod P!!!oml O 6a0RR.& Tru.t o 410R|ltdlcr lnlulnc.d lrd V, ORIGIN (Plscar'l'x" in On. BoxOnly) to Distlict gl (J2 o3 o 4 Rcnatarcd f, 5 [fll#,' D6 or 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 ONo 23 VIII. RELATEDCASE(S) T['ANY (Scc iBtructiond): oocxs,NUIaER RECEIYT# AMOI]NT AIPLYINC IFP MAO,'I'DCE (v 'J.' Case3:08-cv-00400-DMS-BLMDocument1 Filed0310412008Page13of 13 sJs {4 (tuv. ll/04) CTVILCOYERSHEET TheJs44civitcovcr3hectcndlhcinformBtionconir.incdh!i!iDD!ithcrrD|rccnoI!uppl.'nrnr!hcflhBMsrrviceofpleadiggs5,io-hirdlpers].siuidWllv bv|oc6lru|.sofcoun'ThisforiLaDDrbvedbvtheJudiciaIconfe'alccoffeUnitcdsidc6insatcrnbif|974,isEquir€dforhi.usoq1tliggt$l;rhccivildockctshcer.(sEEINsriUCTloNs oFTHEFoRM.) ONTfiEREITRSE I. (a) PLAINTIFFS DEFENDANTS 08HAR _q nH R:Eq ' SecuritiesandExchangeCommission TucoTrading,LLCandDouglasG.Fibileiickv .,u-s..0tsTA *- siji'lii.r'trirH;r?rrilc^r.co-uiT t,lf,l.;,,,?iI 1C1 C ofRcaidcnceofFir$ Pbintiff co*ty {inoiaa". otii"r Llnlibi"l},1}"1',u' c thif Dlogo m (b) County Lirr€d (EXCEFTrN U.S.PLAJNIITTCASES) IiI (IN U.S.(IN U.S. PLAINTIFFPLAINTIIT CASESCASES ONLYI ONLY) $ **' AnoN6+t8s' oFTlrE usETTFr'ecnrroN ffiiN?3ii:f e'ornoyso***ifl$ (C) Aflom€?'s (Fim NaIn , Addr€r, ind Tck?lloi€ Nurnlcr) CV 0 4 00 DMSBtM DonaldW.Searles, Btvd.,t lth RoberoA. Tercero,SEC,56?0Wilshire Los CA -323-96s-3998 lI. BASIS OF JURISDICTION Ohc.ar'x"inoftcBo'Only) 5 | U.S.Covctuniln Pl.i itr O 3 Fcdlr.l QrEtiotl (U,S.OovcruEd

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DONALDW. SEARLES, Ca].BarNo. 135705SearlesD@sec.gov 2
KELLY BOWERS, Cal. Bar No. 164007BowersK@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 Floor8 Los Angeles, Califomia 90036Telephone:(323)965-39989 Facsimile:(323)965-3908 l0 ll
UNITED STATES DISTRICT COURT t2
SOUTHERN DISTRICT O[' CALIFORNIA l3 cv
u 4 00DMsBLM t4
SECURITIESAND EXCHANGE c*"No.,'0g COMMISSION,l5 Co[DLAr{T FoR VIoLATIoNS OF TM ii r6 . Plaintiff, FbpERAL SEcuRrrrFs LAws !. ll 14 vs, II l8
TUQOTRADING, LLC'hnd DOUGLASG. FREDERICK, t9 Defendants. 20 2l 22 23 24 ?{ 26 27 28 1 Case 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 ll 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 -l­ Document1 Filed035/2008 Page4 of 13 Case 3:08-cv-00400-US-BLM I I U.S.C. $$ 78u(d

12 )(l), 78u(dX3)(A), 78u(e) & 78aa. Defend
)(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 of4 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 ll 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 2l 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 had that had positiveequitybalances )1 equitybalancesbelow$25,000,theminimum equity required by NASD day-tradingrules. 28 -3­ Case 3:08-cv-00400-ryS-BLM Document1 Filed 035/2008 Page 6 of 13 1 and NYSE rules. z 18. Frederickmonitors how much trading powereachtrader uses by checking Tuco'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, which5' Tuco satisfies by bonowing funds from third parties.Each week, Tuco borrows and pays back6 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 ll 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 tt tJ 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 2l 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 11 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 -)­ Case 3:08-cv-00400-US-BLM Document1 Filed 035/2008 Page 7 of 13 t to $8 per I ,000 shares haded. Tirco also chargesits traders certain additionalfees,such as for2 wiring of funds withdrawn from Ttrco, sending withdrawal checks by overnight mail, and forprovidingsoftware,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 ll 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 pa

13 y its expenses )\ using the transactio
y 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 acknowledges2 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 a4 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 always8 100%. In other words, Tuco and Frederickagree and representto the trader that 100% of the9 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. 2l 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,whichis purportedlytheamount of money 27 availableto the tader for tading, distibution or withdrawal. 28 /// Document1 Filed03/52008 Case 3:08-cv-00400-TS-BLM Page 10 of13 I Tuco'staders 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 Jt. 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 Filed031ry008 Page Case3:08-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. ll Order defendants Tuco and Frederick to disgorge all ill-gotton gainsfrom their illegal t2 conduc! together with prejudgrnentinter€stthereon 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 andthel8 Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and19 decrees that may be entered, or to entertain any suitable application or motion for additional20 relief within the jwisdiction of this Court.2l VII.22 Grant such other and further relief asthis Court may determine to be just andnecessary.23 24 DATED:uar*r f, zooa 25 Attomeys for Plaintiff 26 Securitiesand Exchange Commission 27 28 -11Â