2009 BCSECCOM 295

Background
1. Mercury Capital S.A. (Mercury) was incorporated in Turks and Caicos Islands.

2. Moenkopi Resources Inc. (Moenkopi) was incorporated in Nevada on September 29, 1998.

3. Frey Mining Company Ltd. (Frey Mining) was incorporated in Nevada on May 4, 2001.

4. Steven Peter Kyllo (Steve Kyllo) was a resident of British Columbia for at least 10 years prior to May 2007. He was the authorized representative of Mercury and sole director and officer of Moenkopi and Frey Mining. He had control over two Moenkopi bank accounts at the Bank of America where investors sent funds.

5. Glen Matthew (Matthew) is a resident of British Columbia.

6. David Malcolm Ruthven, also known as Mal Ruthven (Ruthven) is a resident of British Columbia.

7. Cheryl Anne Kyllo (Cheryl Kyllo) is a resident of British Columbia and a daughter-in-law of Steve Kyllo. Cheryl Kyllo was registered under the Act from 1993 to 2007 as a salesperson restricted to mutual fund securities. She became registered to trade securities as a salesperson with an investment dealer in 2008.

8. Steve Kyllo, Matthew and Ruthven were never registered under the Act.

Misconduct
Illegal trading and distribution of securities
9. Frey Mining offered for sale a security that promised to give investors a percentage of the future sale proceeds of gold and precious metals from a Utah mine (the Frey Mining Security).

10. Moenkopi offered for sale a security that purported to allow investors to receive ten times their initial investment upon Moenkopi receiving its first payment from a high-yield private placement program (the Moenkopi Security).

11. Mercury offered for sale a security that purported to allow investors to participate in a high-yield non solicitation feeder program. Mercury promised to pay investors 25% per month for four months with the return of all principal at the end of the fourth month (the Mercury Security).

12. Between 2004 and 2006, Frey Mining, Steve Kyllo, Matthew and Ruthven sold Frey Mining Securities.

13. Between September 2002 and November 2004, Moenkopi, Steve Kyllo, Matthew and Ruthven sold Moenkopi Securities.

14. Between June and August 2005, Mercury, Steve Kyllo, Matthew, Ruthven and Cheryl Kyllo sold Mercury Securities.

15. The Respondents traded and distributed at least $1,081,572 of Frey Mining, Moenkopi and Mercury Securities to at least 32 investors, including at least 12 residents of British Columbia.

16. Mercury, Moenkopi and Frey Mining did not file a prospectus under the Act for the sale of their securities.

17. By trading and distributing securities without being registered or having filed a prospectus, Steve Kyllo, Matthew, Ruthven, Frey Mining, Moenkopi and Mercury contravened sections 34 and 61 of the Act.

18. By trading and distributing the Mercury Security while being restricted to trading mutual funds, Cheryl Kyllo contravened sections 34 and 61 of the Act.

19. Steve Kyllo as an authorized representative of Mercury, and officer and director of Moenkopi and Frey Mining, authorized, permitted or acquiesced in their contraventions of sections 34 and 61 of the Act, and, therefore, he also contravened the same provisions under section 168.2 of the Act.

Misrepresentations
Moenkopi and Mercury Securities (collectively, the High-Yield Securities)
20. Upon Steve Kyllo’s instructions, Mercury, Moenkopi, Matthew, and Ruthven made the following statements to investors in the High-Yield Securities (the Promises):

(a) Investors’ money would be invested with traders dealing in large private high-yield trading programs;

(b) Investors’ funds would not be put at risk;

(c) Investors in Moenkopi Securities would receive returns of ten times their initial investment; and

(d) Investors in Mercury Securities would receive returns of 25% per month for four months and the return of their principal at the end of four months.

21. Cheryl Kyllo made the same Promises to investors in Mercury Securities only.

22. The Promises were untrue, false, or misleading.

23. Mercury, Moenkopi, Steve Kyllo, Matthew, Ruthven and Cheryl Kyllo knew or ought to have known that the Promises were untrue, false or misleading because:

(a) private high-yield trading programs as described in the Promises did not exist; and

(b) profits of 25% per month or “10 times the amount initially invested” with little or no risk through a securities investment are impossible.

24. In addition, Steve Kyllo knew or ought to have known that the Promises to the investors in the High-Yield Securities were untrue, false or misleading because:

(a) he never invested the proceeds of the sale of Moenkopi Securities into a high-yield private placement program but instead commingled them with the funds from the Frey Mining Securities investors;

(b) he only invested $93,000 USD of the sale of Mercury Securities into a so-called high-yield trading program, from which he received no returns;

(c) he only paid six investors in Mercury Securities approximately $43,735 USD, which came from other investors’ money, and

(d) he transferred the rest of the Mercury Securities investor funds to himself, his wife, Moenkopi, Matthew and Cheryl Kyllo.

25. In making the untrue, false or misleading Promises, Mercury, Moenkopi, Steve Kyllo, Matthew, Ruthven and Cheryl Kyllo made misrepresentations contrary to section 50(1)(d) of the Act.

Fraud
The Mercury Securities
26. After informing the investors that he had cancelled the Mercury Securities investment program as of October 19, 2005, Steve Kyllo continued to promise investors until at least the end of 2006 that the returns on their funds would come imminently. In fact, by February 2006 he had already transferred the rest of the money to himself, his wife, Moenkopi, Matthew and Cheryl Kyllo and had no other source of income.

27. By misdirecting investors’ funds, and making the above false statements and the Promises while trading and distributing the Mercury Securities, Steve Kyllo perpetrated a fraud contrary to sections 57(b) and 57.1(b) of the Act.

Hearing Process

“Brenda Leong”

Executive Director