Ex-Central Sleep Diagnostics Chair to Pay Over $2m for Misappropriation, Fraud

Jack Humphrey, Regulatory journalist
April 12, 2012 /

Judge Virginia M. Kendall of the United States District Court for the Northern District of Illinois entered a final judgment by default against Kenneth A. Dachman, the former founder and Chairman of Central Sleep Diagnostics, LLC, Central Sleep Diagnostics of Florida, LLC, and Advanced Sleep Devices, LLC.

Among other things, the Court ordered Dachman to pay disgorgement of over $1.8 million plus prejudgment interest related to his role in an offering fraud and misappropriation scheme.

The SEC’s complaint alleged that between July 2008 and June 2010, Dachman raised at least $3,594,709 from investors in 13 states and 12 foreign countries on behalf of Central Sleep and an additional $567,399 from investors in Central Sleep Florida and Advanced Sleep.

According to the complaint, Dachman made numerous misrepresentations to investors while selling the investments, including lying about how investor funds would be used and his academic and business backgrounds. Dachman also failed to tell investors that he had misappropriated at least $1,875,739.42 of their funds, over 45% of the total funds raised.

According to the SEC’s complaint, Dachman used investor funds for a variety of personal uses, including renting-to-own a 10,000 square foot home, family vacations to Alaska, Europe and elsewhere, a new Range Rover, rare books, collectibles and antiques, and other personal expenses and credit card bills. Dachman also diverted investor funds to a tattoo parlor that he co-owned with his son-in-law.

The Court’s final judgment orders Dachman to pay $1,875,739.42 in disgorgement and $194,756.43 in prejudgment interest, and permanently bars him from participating in any offering of penny stock.


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