Yosemite Capital Management, Llc

Allegations: SEC ADMINISTRATIVE RELEASE IA 40-3005, MARCH 17, 2010: THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION") DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, AND HEREBY ARE, INSTITUTED PURSUANT TO SECTIONS 203(E), 203(F) AND 203(K) OF THE INVESTMENT ADVISERS ACT OF 1940 ("ADVISERS ACT"), AGAINST YOSEMITE CAPITAL MANAGEMENT, LLC ("YOSEMITE" OR "RESPONDENT"). THESE PROCEEDINGS INVOLVE THE FAILURE OF YOSEMITE TO DISCLOSE TO CLIENTS THAT THEIR PROMISED DUE DILIGENCE HAD ENCOUNTERED SIGNIFICANT PROBLEMS. YOSEMITE, THROUGH ITS PRINCIPAL, PLACED $3.25 MILLION OF FOUR OF ITS CLIENTS' FUNDS THROUGH A "FEEDER FUND," INTO PURPORTED BRIDGE LOANS ARRANGED BY ANOTHER INDIVIDUAL AND HIS COMPANY. INSTEAD OF BEING PLACED IN BRIDGE LOANS, HOWEVER, THE MONEYS WERE PART OF THE INDIVIDUAL'S $60 MILLION PONZI SCHEME. IN JANUARY 2007, PRIOR TO PLACING HIS CLIENTS' INVESTMENTS WITH THE FEEDER FUND AND THE COMPANY, THE PRINCIPAL PROMISED TO CONDUCT DUE DILIGENCE TO AT LEAST TWO CLIENTS PRIOR TO PLACING HIS CLIENTS INTO THE FEEDER FUND INVESTMENT. ALTHOUGH THE PRINCIPAL ASKED FEEDER FUND REPRESENTATIVES SEVERAL KEY QUESTIONS, HE RECEIVED INCOMPLETE, CONTRADICTORY, AND EVASIVE RESPONSES. HE RECEIVED NO FINANCIALS. INVESTORS WERE PROMISED A HIGH RATE OF RETURN, EFFECTIVELY 24% PER YEAR, AND RECEIVED A POST-DATED CHECK SHORTLY AFTER INVESTING IN THE AMOUNT OF THEIR PRINCIPAL PLUS INTEREST. IN RESPONSE TO THE PRINCIPAL'S REQUESTS FOR INFORMATION, HE WAS TOLD THAT THE INDIVIDUAL WAS A PRIVATE PERSON AND NO INFORMATION WAS AVAILABLE. HE ALSO RECEIVED AN EIGHT-PAGE BROCHURE FROM THE FEEDER FUND REPLETE WITH MISSPELLINGS, AND WAS TOLD THAT THE BRIDGE LOANS WERE SAFER THAN STOCKS OR BONDS. BECAUSE THE FEEDER FUND HAD NO OFFICES, THE PRINCIPAL MET THE THREE REPRESENTATIVES -- ONE OF WHOM THE PRINCIPAL BELIEVED WAS A UPS TRUCK DRIVER OR DELIVERYMAN -- AT LOCAL RESTAURANTS TO DISCUSS THE INVESTMENT. DESPITE THESE RED FLAGS, THE PRINCIPAL PLACED FOUR YOSEMITE CLIENTS INTO THE FEEDER FUND INVESTMENT WITHOUT DISCLOSING TO CLIENTS THAT HIS DUE DILIGENCE PROCESS HAD BEEN THWARTED. AS A RESULT OF THE CONDUCT DESCRIBED ABOVE, THE PRINCIPAL AND YOSEMITE WILLFULLY VIOLATED SECTION 206(2) OF THE ADVISERS ACT, WHICH PROHIBITS ANY INVESTMENT ADVISER FROM ENGAGING IN ANY TRANSACTION, PRACTICE, OR COURSE OF BUSINESS, WHICH OPERATES AS A FRAUD OR DECEIT ON ANY CLIENT OR PROSPECTIVE CLIENT, AND THE PRINCIPAL CAUSED YOSEMITE'S VIOLATIONS OF SECTION 206(2) OF THE ADVISERS ACT. Status: Final Sanction Detail: RESPONDENT HAS SUBMITTED AN OFFER OF SETTLEMENT WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. SOLELY FOR THE PURPOSE OF THESE PROCEEDINGS AND ANY OTHER PROCEEDINGS BROUGHT BY OR ON BEHALF OF THE COMMISSION, OR TO WHICH THE COMMISSION IS A PARTY, AND WITHOUT ADMITTING OR DENYING THE FINDINGS HEREIN, EXCEPT AS TO THE COMMISSION'S JURISDICTION OVER IT AND THE SUBJECT MATTER OF THESE PROCEEDINGS, WHICH ARE ADMITTED, RESPONDENT CONSENTS TO THE ENTRY OF THIS ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTIONS 203(E), 203(F) AND 203(K) OF THE INVESTMENT ADVISERS ACT OF 1940, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER. AS A RESULT OF ITS CONDUCT, THE PRINCIPAL AND YOSEMITE WILLFULLY VIOLATED SECTION 206(2) OF THE ADVISERS ACT. AS A RESULT OF ITS CONDUCT, THE PRINCIPAL WILLFULLY CAUSED YOSEMITE'S VIOLATIONS OF SECTIONS 206(2) OF THE ADVISERS ACT, WHICH MAKES IT UNLAWFUL FOR AN ADVISER TO ENGAGE IN ANY TRANSACTION, PRACTICE, OR COURSE OF BUSINESS THAT OPERATES AS A FRAUD OR DECEIT UPON ANY CLIENT. ACCORDINGLY, PURSUANT TO SECTIONS 203(E), 203(F) AND 203(K) OF THE ADVISERS ACT, IT IS HEREBY ORDERED THAT RESPONDENT YOSEMITE CAPITAL MANAGEMENT, LLC CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 206(2) OF THE ADVISERS ACT; RESPONDENT YOSEMITE CAPITAL MANAGEMENT, LLC IS CENSURED; RESPONDENT YOSEMITE CAPITAL MANAGEMENT, LLC SHALL, WITHIN 30 DAYS OF THE ENTRY OF THIS ORDER, PAY DISGORGEMENT OF $26,000.00, PREJUDGMENT INTEREST OF $3,071.86 AND CIVIL PENALTIES OF $50,000.00 (FOR A TOTAL AMOUNT OF $79,071.86) TO THE UNITED STATES TREASURY. YOSEMITE CAPITAL MANAGEMENT, LLC SHALL COMPLY WITH THE UNDERTAKINGS ENUMERATED. Summary: UNDERTAKINGS: WITHIN THIRTY (30) DAYS OF THE ISSUANCE OF THIS ORDER, MAIL A COPY OF THE FORM ADV WHICH INCORPORATES THE PARAGRAPHS CONTAINED IN THE SUMMARY SECTION OF THIS ORDER TO EACH OF YOSEMITE'S EXISTING CLIENTS, AND SPECIFY THAT THE ENTIRE ORDER WILL BE POSTED ON YOSEMITE'S WEBSITE. WITHIN THIRTY (30) DAYS OF THE ISSUANCE OF THIS ORDER, POST A COPY OF THIS ORDER ON YOSEMITE'S WEBSITE AND MAINTAIN THIS COPY OF THE ORDER ON YOSEMITE'S WEBSITE FOR A PERIOD OF SIX (6) MONTHS. RESPONDENTS SHALL ALSO PROVIDE A COPY OF THE FORM ADV TO ANY NEW CLIENT THAT ENGAGES YOSEMITE OR ITS PRINCIPAL WITHIN TWO (2) YEARS OF THE DATE OF THIS ORDER.