On February 6, 2012, the Securities and Exchange Commission charged Glencoe, Illinois resident Kenneth A. Dachman with misappropriating over $1.8 million in investor funds and making false and misleading statements to investors in offerings for three companies for which he was the Chairman – Central Sleep Diagnostics, LLC (Central Sleep), Central Sleep Diagnostics of Florida, LLC (Central Sleep Florida), and Advanced Sleep Devices, LLC (Advanced Sleep). The SEC also charged Scott A. Wolf and his company, Stone Lion Management, Inc., the brokers for the three offerings, for their roles in selling unregistered securities to investors.
Filed in the U.S. District Court for the Northern District of Illinois, the SEC’s complaint alleges that between July 2008 and June 2010, Dachman raised at least $3,594,709 from investors located in 13 states and 12 foreign countries on behalf of Central Sleep, a purported provider of outpatient diagnostic sleep studies. Between December 2008 and April 2010, Dachman raised an additional $567,399 on behalf of Central Sleep Florida, a purported expansion of Central Sleep into Florida, and Advanced Sleep, a purported provider of medical devices. According to the complaint, Dachman made numerous misrepresentations to investors in each of the companies, including misrepresentations about how their funds would be used and his academic and business backgrounds. Dachman also failed to tell investors that he misappropriated at least $1,875,739 of their funds, over 45% of the total funds raised. According to the SEC’s complaint, among other things, Dachman used investor funds to rent-to-own a 10,000 square foot home, to pay for family vacations to Alaska, Europe and elsewhere, to purchase a new Range Rover, books, collectibles and antiques, and for personal expenses and credit card bills. Dachman also diverted investor funds to a tattoo parlor that he co-owned with his son-in-law.