ALZHEIMER PRODUCTS COMPANY AND PRESIDENT ORDERED TO PAY $1.9 MILLION

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Court Orders California Company and Its President to Pay Over $1.9 Million in Investment Scheme Involving Purported Alzheimer's Treatment

The Securities and Exchange Commission announced that on June 10, 2014, a California federal court entered final judgments against Your Best Memories International Inc., a promoter of a purported Alzheimer’s treatment, its president, Robert Hurd, and Smokey Canyon Financial Inc., another company controlled by Hurd.  Your Best Memories and Hurd, both of Los Angeles, California, were charged as defendants in a fraud action filed by the Commission in June 2013.  The Commission alleged that they claimed to be in the business of raising money from investors on behalf of a Massachusetts-based company that was in the business of developing products intended to improve memory function in individuals suffering from Alzheimer's disease and other conditions.  The Commission charged Your Best Memories and Hurd with misleading investors about how their funds would be used and making misleading statements that one of the products touted to investors had received approval from the U.S. Food and Drug Administration as a treatment for Alzheimer's disease.  Smokey Canyon Financial, based in Reno, Nevada, was charged by the Commission as a relief defendant because it received investor funds.

According to the Commission’s complaint, filed on June 20, 2013, Your Best Memories and Hurd falsely told investors that their funds would largely be used to finance the development and marketing of products intended to improve memory function in individuals suffering from Alzheimer’s disease, dementia or memory loss.  The Commission alleged that, unbeknownst to investors, a mere 17% of the funds raised were used for their intended purpose, while 37% of investor funds were funneled to Hurd or his company, Smokey Canyon Financial.  The Commission also alleged that Your Best Memories and Hurd made Ponzi payments to investors (using investors' principal to make payments purporting to be investment returns to other investors) and falsely stated that they had secured FDA approval to sell coconut oil as a treatment for Alzheimer’s disease, when, in fact, the FDA had never approved such a claim.  The complaint alleged that, in total, Your Best Memories raised approximately $1.2 million from more than 50 investors in an unregistered securities offering.

The final judgments, entered by default by the United States District Court for the Central District of  California, imposed permanent injunctions prohibiting Your Best Memories and Hurd from future violations of Sections 5(a) and (c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934.  Your Best Memories, Hurd, and Smokey Canyon Financial also were ordered to pay disgorgement of $963,000 and prejudgment interest of $34,170.  In addition, Your Best Memories and Hurd were ordered jointly and severally to pay a civil penalty of $963,000.

On March 14, 2014, the Court entered a partial final judgment, by consent, against the other Defendant in the action, Kenneth Gross, of Porter Ranch, California, who was charged with selling Your Best Memories stock without being registered as a broker-dealer as required by the federal securities laws.  The judgment permanently enjoined Gross from future violations of Sections 5(a) and (c) of the Securities Act and Section 15(a) of the Exchange Act, with disgorgement, prejudgment interest and civil penalties to be decided by the Court at a later date.   The Commission also instituted a settled follow-on administrative proceeding against Gross on March 6, 2014, permanently barring him from the securities industry.

SEC HALTS ALLEGED OIL AND GAS PONZI SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
SEC Halts Texas-Based Oil and Gas Investment Scheme

The Securities and Exchange Commission today announced charges and an emergency asset freeze against the perpetrators of a Texas-based Ponzi scheme involving purported investments in oil and gas projects.

The SEC alleges that Robert A. Helms and Janniece S. Kaelin, who work out of an office in Austin, misled investors about their experience in the oil and gas industry while raising nearly $18 million for supposed purchases of oil and gas royalty interests. Despite representations that nearly all of the money they raised would be used to make oil and gas investments, Helms and Kaelin actually used only a fraction of the offering proceeds for that purpose. Instead, the vast majority of investor funds were used to make Ponzi payments and cover various personal and business expenses.

The SEC's complaint unsealed late yesterday in U.S. District Court for the Western District of Texas also charges Deven Sellers of Arvada, Colo., and Roland Barrera of Costa Mesa, Calif., with illegally selling investments for Helms and Kaelin without being registered with the SEC. They also allegedly misled investors about the sales commissions and referral fees they were receiving.

According to the SEC's complaint, Helms and Kaelin began offering investments in 2011 through Vendetta Royalty Partners, a limited partnership that they control. They have since attracted at least 80 investors in more than a dozen states while promising in offering documents that they would use more than 99 percent of the investment proceeds to acquire a lucrative portfolio of oil and gas royalty interests. The offering documents were fraudulent as Helms and Kaelin invested only 10 percent of the proceeds, and the oil and gas projects in which they actually did invest generated only minuscule returns.

The SEC alleges that Helms and Kaelin directed Vendetta Royalty Partners to make approximately $5.9 million in so-called partnership income distributions to investors. They used money from newer investors to make the distributions to earlier investors. Helms and Kaelin created the illusion that Vendetta Royalty Partners was a profitable enterprise when, in fact, it was a fraudulent Ponzi scheme. Some offering documents touted Helms to have extensive oil-and-gas experience, misrepresenting that he had "worked with various mineral companies over the last 10 years advising management on issues involving the acquisition and management of royalty interests, mineral properties and related legal and financial issues." In fact, Helms's oil-and-gas experience came almost entirely from operating Vendetta Royalty Partners and its affiliated or predecessor companies.

The SEC alleges that Helms and Kaelin misled investors about other important matters besides their business background and industry reputation. They failed to disclose the existence of litigation against them and companies they control. They misrepresented the performance of the limited oil-and-gas royalty investments actually under their management. And they failed to inform investors that Vendetta Royalty Partners was behind on its line of credit. The company ultimately defaulted.

According to the SEC's complaint, Helms and Kaelin along with Sellers and Barrera told potential investors that any commissions or finder's fees would be small. However, Sellers and Barrera each received more than $200,000 in such fees on one investment alone. Sellers and Barrera regularly solicited investments without being registered as brokers.

At the SEC's request, the court entered an order temporarily restraining the defendants from further violations of the federal securities laws, freezing their assets, prohibiting the destruction of documents, requiring them to provide an accounting, and authorizing expedited discovery.

The SEC's complaint alleges that the defendants violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint further alleges that Sellers and Barrera acted as unregistered brokers in violation of Section 15(a) of the Exchange Act. The complaint requests permanent injunctions and the disgorgement of ill-gotten gains plus prejudgment interest and penalties.

The SEC's investigation was conducted by Chris Davis, Carol Hahn, and Joann Harris of the Fort Worth Regional Office. The SEC's litigation will be led by Timothy McCole. The SEC appreciates the assistance of the Federal Bureau of Investigation, U.S. Secret Service, and Texas State Securities Board.

SEC ANNOUNCES ASSET FREEZE RELATED TO ALLEGED PONZI SCHEME INVOLVING U.S.-NEW ZEALAND COMPANIES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission today announced an emergency asset freeze to halt a Ponzi scheme involving U.S. and New Zealand-based companies peddling sham investment opportunities ranging from a bank trading program to kidney dialysis clinics.

The SEC alleges that Christopher A.T. Pedras, who has residences in Turlock, Calif., and New Zealand, misled his initial investors into believing they were investing in a profitable trading platform in which his company served as an intermediary between global banks.  When Pedras and his companies encountered difficulty paying the promised 4 to 8 percent monthly returns, they began steering investors to a different investment program to purportedly increase the value of their investment by 80 percent by funding kidney dialysis clinics in New Zealand.  Pedras’s business partner Sylvester M. Gray II and lead sales representative Alicia Bryan helped him solicit investors for both programs, and the money was never invested as promised.  Earlier investors were paid supposed returns with funds received from newer investors, and Pedras stole more than $2 million and spent another $1.2 million on sales agents.

“Rather than conducting any legitimate business activity, Pedras and his partners were simply operating a Ponzi scheme that was ultimately doomed to collapse,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office.  “This emergency action stops them from fraudulently raising any more money from U.S. investors.”

According to the SEC’s complaint unsealed late Friday in U.S. District Court for the Central District of California, Pedras raised more than $5.6 million from at least 50 investors in the U.S. since July 2010 by selling securities in two phases.  Pedras, Gray, and Bryan first solicited investors for their Maxum Gold Small Cap Trade Program in which Pedras’s company Maxum Gold purportedly serves as the intermediary between banks that can’t legally trade with each other directly, so they use Maxum Gold’s trade platform to do so indirectly.  Maxum Gold purports to share portions of the trading profits with investors. 

The SEC alleges that the Ponzi scheme shifted gears earlier this year when Pedras and others began promoting the FMP Renal Program to Maxum Gold investors.  They characterized it as an investment in a New Zealand company called FMP Medical Services Limited that would be publicly traded and operate kidney dialysis clinics in New Zealand.  Investors were told if they converted their Maxum Gold investments into the FMP Renal Program, they would instantly realize an 80 percent increase in the value of their investment.

According to the SEC’s complaint, Pedras and Bryan routinely communicate with investors via email and also conduct investor conference calls.  Pedras has falsely claimed that Maxum Gold has been doing business for 15 to 20 years with more than 6,000 clients and has been making regular payments to investors.  Pedras conducted at least one in-person seminar at Paramount Studios in Los Angeles.  Investments were falsely touted as risk-free and investor funds were not maintained safely in escrow accounts as described to investors.

The SEC alleges that the Ponzi scheme paid investors more than $2.4 million in “returns” using new investor money.  Pedras stole more than $2 million from investors in the form of cash withdrawals, car and retail purchases, and transfers of investor funds to his various companies.  Approximately $1.2 million in sales commissions were paid to a small network of sales agents who sold the investments to U.S. investors.

According to the SEC’s complaint, during at least one conference call, Pedras advised investors not to respond if contacted by the SEC.  He characterized SEC investor questionnaires as “fake” and stated that the SEC’s investigation was motivated by a “personal vendetta” against him.

The SEC’s complaint charges Pedras, Gray, Bryan and the Maxum Gold and FMP entities with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  Pedras and Bryan also are charged with violations of Section 15(a) of the Exchange Act, and they and Pedras’s companies are charged with violations of Sections 5(a) and 5(c) of the Securities Act.  The Honorable Gary Feess granted the SEC’s request for a temporary asset freeze against Maxum Gold, FMP, and Pedras.  Judge Feess’s order prohibits the destruction of documents and requires the defendants to provide accountings.  A court hearing has been scheduled for November 8. 

The SEC’s investigation was conducted by J. Cindy Eson, Peter F. Del Greco, and Dora Zaldivar of the Los Angeles office.  The SEC’s litigation will be led by Amy Longo and Karen Matteson.  The SEC appreciates the assistance of the New Zealand Financial Markets Authority.

CHICAGO RESIDENT ORDERED TO PAY OVER $1.3 MILLION TO SETTLE SETTLE FOREX PONZI SCHEME

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
Federal Court Orders Chicago Resident Christopher Varlesi to Pay over $1.3 Million to Settle Ponzi Scheme Fraud and Misappropriation Action

Varlesi used misappropriated investor funds for business and personal expenses, such as entertainment, travel, restaurants, his children’s tuition, and spa treatments

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court Order against Defendant Christopher Varlesi of Chicago, Illinois, individually and doing business as Gold Coast Futures and Forex, requiring him to pay restitution of more than $638,000 to defrauded investors and a $700,000 civil monetary penalty. The consent Order of permanent injunction, entered June 12, 2013, by Judge James B. Zagel of the U.S. District Court for the Northern District of Illinois, also imposes permanent trading and registration bans against Varlesi and prohibits him from violating the anti-fraud provisions of the Commodity Exchange Act (CEA), as charged.

The Order stems from a CFTC Complaint filed March 7, 2012, charging Varlesi with fraudulently operating a commodity pool to trade commodity futures and off-exchange foreign currency (forex), making false statements to pool participants, misappropriating pool funds, and failing to register with the CFTC as a Commodity Pool Operator.

The Order finds that Varlesi solicited and accepted at least $1.7 million from at least 20 individuals to trade commodity futures and forex contracts by touting his past trading record and ability to profitably trade futures and forex contracts. In exchange for their investment, Varlesi issued promissory notes to pool participants purportedly paying a fixed monthly interest rate on principal, according to the Order. However, Varlesi used no more than $220,000 of the $1,716,169 that he accepted from pool participants to trade commodity futures and forex contracts, the Order finds. Varlesi spent misappropriated investor funds on business and personal expenses, including food, utilities, gas, life insurance, entertainment, travel, restaurants, his children’s tuition, and spa treatments and used approximately $1,343,471 to pay participants purported profits in the manner of a Ponzi scheme, according to the Order.

To perpetuate the fraud, Varlesi made false verbal representations and provided pool participants with fabricated account statements and false account performance documentation, showing that their investments were growing, according to the Order. In fact, the Order finds that Varlesi knew the representations, statements, and account performance documentation were false because he failed to disclose to pool participants that he had misappropriated a significant amount of the pool’s money.

In or around March 2011, Varlesi stopped making interest payments on the promissory notes and admitted to a pool participant that there was no money in his account, the Order finds. Furthermore, despite subsequent promises to repay the pool participants, Varlesi has not done so and still owes 17 pool participants approximately $638,227, the Order finds.

The CFTC appreciates the assistance of the United States Attorney’s Office for the Northern District of Illinois and the Illinois Secretary of State Securities Department.

CFTC Division of Enforcement staff members responsible for this case are Robert Howell, Mary Elizabeth Spear, Ava M. Gould, Scott Williamson, Rosemary Hollinger, and Richard Wagner.

CFTC CHARGES COMPANY AND PRINCIPAL WITH FOREX FRAUD VIA PONZI SCHEME

FROM: COMMODITY FUTURES TRADING COMMISSION
CFTC Charges New York Firm 4X Solutions, Inc. and its Principal, Whileon Chay, with Forex Fraud Ponzi Scheme

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of an enforcement action in the U.S. District Court for the Southern District of New York, charging Defendants 4X Solutions, Inc. (4X) and its principal, Whileon Chay, both of New York City, with fraud and misappropriation in a $4.8 million foreign currency (forex) trading Ponzi scheme.

The CFTC Complaint alleges that Chay and 4X fraudulently solicited approximately $4.8 million from at least 19 pool participants by falsely enticing prospective participants with the prospect of earning returns of 24 percent to 36 percent per year and claiming the ability to profit even in adverse market conditions, "when most have lost and lost dearly." At the same time, Defendants minimized the risks of forex trading, claiming, for example, that Defendants had not suffered a single losing month in 14 years and that 4X provides "a safe haven in our current financial environment," according to the Complaint.

The CFTC Complaint also alleges that Chay, who controlled 4X, lost approximately $2 million trading forex in corporate proprietary accounts and misappropriated approximately $2.8 million, using that money to fund 4X’s operations, make purported profit and investment return payments to their customers, and pay for Chay’s personal expenses, including paying for luxury resorts, expensive restaurants, limousine service, and exotic car rentals. The Complaint further alleges that Chay concealed the trading losses and misappropriation by, among other things, issuing or causing to be issued false monthly account statements and checks that purported to represent trading profits and investment returns. All or nearly all of the purported trading profits or returns made by Defendants came from the principal of other participants, the Complaint alleges.

In its continuing litigation, the CFTC seeks restitution to defrauded customers, disgorgement of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the Commodity Exchange Act, as charged.

CFTC Division of Enforcement staff members responsible for this case are Kara Mucha, August A. Imholtz III, James Garcia, Michael Solinsky, Gretchen L. Lowe, and Vincent A. McGonagle.

FINAL JUDGEMENT OBTAINED BY SEC IN ALLEGED MULTI-MILLION DOLLAR PONZI SCHEME

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

SEC OBTAINS FINAL JUDGMENT AGAINST FORMER CHIEF INVESTMENT OFFICER OF GIBRALTAR ASSET MANAGEMENT GROUP, LLC
On April 3, 2013, the Securities and Exchange Commission announced that the Honorable Robert L. Wilkins, United States District Judge for the District of Columbia, entered final judgment on March 28, 2013, against Maurice G. Taylor to settle charges related to his collaboration in a multi-million dollar Washington-area Ponzi scheme operated through Gibraltar Asset Management Group, LLC and Garfield Taylor, Inc. (GTI):

Maurice G. Taylor, of Bowie, Md., formerly Chief Investment Officer at Gibraltar, without admitting or denying the allegations in the SEC’s complaint, consented to the entry of a Final Judgment permanently enjoining him from violations of Section 17(a) of the Securities Act of 1933 and ordering payment of monetary relief in an amount to be determined by the Court upon motion of the Commission. Following an evidentiary hearing, the Court entered a Final Judgment permanently enjoining Taylor and ordering him to pay $463,785 in disgorgement and $50,682.50 in prejudgment interest, for a total of $514,467.50.

The Commission filed a complaint on November 18, 2011, alleging that Gibraltar’s and GTI’s former Chief Executive Officer, Garfield M. Taylor, operating through GTI and Gibraltar, with the assistance of Maurice G. Taylor, Benjamin C. Dalley, Randolph M. Taylor, William B. Mitchell and Jeffrey A. King, conducted a multi-million Ponzi scheme targeting investors in the Washington D.C. metropolitan area. According to the SEC’s complaint, the defendants defrauded more than $27 million from approximately 130 investors between 2005 and 2010.

The Commission’s case is still pending against the remaining defendants: Garfield M. Taylor, Jeffrey A. King, GTI, Gibraltar, and The King Group, LLC. On September 17, 2012, the Court granted the Commission’s motion for default judgment as to Jeffrey King, GTI, Gibraltar and The King Group, LLC, but has not yet determined the appropriate relief against them. On December 13, 2012, the Court granted the Commission’s motion for summary judgment on all charges sought by the Commission against Garfield Taylor. On March 28, 2013, the Court granted Garfield Taylor’s motion to hold the case against him in abeyance, in light of pending federal criminal charges against him.

SEC CHARGES INVESTMENT ADVISER OF RUNNING $37 MILLION PONZI SCHEME

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission today filed fraud charges against a Portland, Oregon-based investment adviser who perpetrated a long-running Ponzi scheme that raised over $37 million from more than 100 investors in the Pacific Northwest and across the country.

The SEC alleges that Yusaf Jawed used false marketing materials that boasted double-digit returns to lure people to invest their money into several hedge funds he managed. He then improperly redirected their money into accounts he personally controlled. As part of the scheme, Jawed created phony assets, sent bogus account statements to investors, and manufactured a sham buyout of the funds to make investors think their hedge fund interests would soon be redeemed. Jawed misused investor money to pay off earlier investors, pay his own expenses and travel, and create the overall illusion of success and achievement to impress investors.

According to the SEC’s complaint filed in federal court in Portland, Jawed managed a number of hedge funds through at least two companies he controlled: Grifphon Asset Management LLC and Grifphon Holdings LLC. Jawed’s marketing materials claimed that the Grifphon funds earned double-digit returns year after year even as the S&P 500 Index declined. For certain funds, Jawed also falsely claimed they would invest in publicly-traded securities and that their assets were maintained at reputable financial institutions.

The SEC alleges that Jawed instead invested very little of the more than $37 million that he raised from investors. For one fund, 70 percent of the money raised was either paid in redemptions to investors in other funds, paid to finders, or merely transferred to accounts belonging to Grifphon Asset Management or other entities that Jawed controlled. Jawed concealed the fraud by telling Grifphon’s bookkeepers that the money transfers represented purchases of offshore bonds – though in reality the purported investment was a sham entity supposedly managed by Jawed’s unemployed aunt who lives in Bangladesh.

According to the SEC’s complaint, Jawed further deceived investors as the funds were collapsing by telling them that independent third parties were buying the Grifphon funds’ alleged assets at a premium. In truth, the so-called third-parties were sham entities originally formed by Grifphon and Jawed containing no assets, no income, and no ability to pay for the funds’ alleged assets.

The SEC’s complaint against Jawed additionally charges Robert P. Custis, an attorney who Jawed hired to assist him in the fraud. Custis sent false and misleading statements to investors about the status of the purported purchase of the Grifphon funds’ assets. Custis consistently misrepresented that this purchase was imminent and would result in investors’ investments being repaid at a profit.

By engaging in the above conduct, Jawed, GAM, and Grifphon Holdings violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. By engaging in the above conduct, Custis violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and aided and abetted violations of Section 206(4) and Rule 206(4)-8 thereunder. The Commission seeks a permanent injunction, disgorgement and prejudgment interest, civil penalty, and other relief as appropriate against them.

The SEC filed separate complaints against two others connected to Jawed’s scheme. Those complaints allege that Jacques Nichols – a Portland-based attorney – falsely claimed to investors that an independent third party would pay tens of millions of dollars to buy the hedge funds’ alleged assets at a premium, and that Jawed’s associate, Lyman Bruhn, of Vancouver, Wash., ran a separate Ponzi scheme and induced investments through false claims he was investing in "blue chip" stocks.

Without admitting or denying the allegations, Nichols, Bruhn, and two entities Bruhn controlled (Pearl Asset Management, LLC and Sasquatch Capital Management, LLC) agreed to settle the SEC’s charges. Along with other relief, Bruhn consented to the entry of permanent injunctions against violations of the Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2), 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. Along with other relief, Nichols consented to the entry of a permanent injunction against violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and aiding and abetting violations of Sections 206(1), 206(2), and 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. The SEC’s litigation continues against Jawed, the two Grifphon entities, and Custis.

AN OUTLINE OF AN ALLEGED PONZI-LIKE INVESTMENT FUND

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., June 28, 2012 — The Securities and Exchange Commission today announced that it has obtained an emergency court order to halt an alleged Ponzi-like scheme operated by Small Business Capital Corp. and its principal Mark Feathers, who raised $42 million by selling securities issued by Investors Prime Fund LLC and SBC Portfolio Fund LLC - two mortgage investment funds they controlled.

The SEC alleges that more than 400 investors were attracted to the funds by promises that profits from mortgage investments would yield annual returns of 7.5 percent or more. In reality, Feathers operated a Ponzi-like scheme by paying returns to investors that came partly from fund profits and partly from other investors.

“Feathers raised millions from investors by promising high returns,” said John McCoy, Associate Regional Director of the SEC’s Los Angeles Office. “The returns turned out to be too good to be true and were funded in part with new investors’ money.”

The SEC alleges that from 2009 to early 2012, Feathers improperly transferred more than $6 million from the funds to Small Business Capital to pay its expenses, including substantial payments to Feathers. According to the SEC, the defendants had the funds account for the transfers in a way that disguised the depletion of fund assets, and did not tell investors that Small Business Capital’s ability to repay was uncertain and that it was only able to make the interest payments owed to the funds by borrowing more from them.
In addition, the SEC alleges that investors were not told that in February and March 2012, the defendants caused one fund to sell mortgages to the other fund at an inflated price, thus generating a “profit” for the selling fund so it could pay Small Business Capital management fees of more than $575,000. The SEC also charged Feathers and Small Business Capital for Small Business Capital’s effecting transactions in the funds’ securities without being registered as a broker-dealer with the SEC.

The Honorable Edward J. Davila for the U.S. District Court for the Northern District of California granted the SEC’s request for a temporary restraining order and asset freeze against Feathers, Small Business Capital, and the funds, and appointed Thomas A. Seaman as a temporary receiver over Small Business Capital and the funds. Judge Davila has scheduled a court hearing for July 10, 2012, on the SEC's motion for a preliminary injunction.

Susan Hannan and Roger Boudreau conducted the investigation and John Bulgozdy will lead the litigation. They work in the SEC's Los Angeles Regional Office.

COURT HALTS ALLEGED $100 MILLION REAL ESTATE BASED PONZI SCAM

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., June 25, 2012 – The Securities and Exchange Commission today obtained a temporary restraining order and asset freeze against a Utah man and company charged with operating a real estate-based Ponzi scheme that bilked $100 million from investors nationwide.

The SEC’s complaint filed in U.S. District Court for the District of Utah, names Wayne L. Palmer and his firm, National Note of Utah, LC, both of West Jordan, Utah. According to the complaint, Palmer told investors that their money would be used to buy mortgage notes and real estate assets, or to make real estate loans. More than 600 individuals invested, lured by promises of annual returns of 12 percent, the SEC alleged.

“Palmer promised double-digit returns at his real estate seminars, where investors learned the hard way about his lies and deceit,” said Kenneth Israel, Director of the SEC’s Salt Lake City Regional Office.

Palmer told investors that their money would be completely secure and that National Note had a perfect record, having never missed paying principal or interest on its promissory notes. Glossy marketing materials that Palmer provided to some investors showed that National Note returns did not fluctuate and stated that investors were guaranteed payment even if property owners missed payment on mortgage loans that National Note held.

Contrary to Palmer’s claims, National Note used most of the money it took in from new investors to pay earlier investors, making it a classic Ponzi scheme, the SEC alleged. It said that since 2009, National Note would not have been able survive but for the influx of new investor funds, and that its payments to investors all but stopped in October 2011. According to the SEC’s complaint, Palmer reassured investors that the money would be forthcoming, and continued to solicit new investors in National Note without disclosing the fact that it is delinquent in making payments to existing investors.

The SEC’s complaint charges National Note and Palmer with violating the anti-fraud and securities registration provisions of U.S. securities laws. Palmer also faces charges that he operated as an unregistered broker-dealer.

Scott Frost, Paul Feindt, Matthew Himes and Alison Okinaka of the SEC’s Salt Lake Regional Office conducted the investigation; Thomas Melton will lead the litigation.

14 SALES AGENTS CHARGED IN $415 MILLION PONZI SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., June 12, 2012 — The Securities and Exchange Commission today charged 14 sales agents who misled investors and illegally sold securities for a Long Island-based investment firm at the center of a $415 million Ponzi scheme.

The SEC alleges that the sales agents — which include four sets of siblings — falsely promised investor returns as high as 12 to 14 percent in several weeks when they sold investments offered by Agape World Inc. They also misled investors to believe that only 1 percent of their principal was at risk. The Agape securities they peddled were actually non-existent, and investors were merely lured into a Ponzi scheme where earlier investors were paid with new investor funds. The sales agents turned a blind eye to red flags of fraud and sold the investments without hesitation, receiving more than $52 million in commissions and payments out of investor funds. None of these sales agents were registered with the SEC to sell securities, nor were they associated with a registered broker or dealer. Agape also was not registered with the SEC.

“This Ponzi scheme spread like wildfire through Long Island’s middle-class communities because this small group of individuals blindly promoted the offerings as particularly safe and profitable,” said Andrew M. Calamari, Acting Regional Director for the SEC’s New York Regional Office. “These sales agents raked in commissions without regard for investors or any apparent concern for Agape’s financial distress and inability to meet investor redemptions.”

According to the SEC’s complaint filed in the U.S. District Court for the Eastern District of New York, more than 5,000 investors nationwide were impacted by the scheme that lasted from 2005 to January 2009, when Agape’s president and organizer of the scheme Nicholas J. Cosmo was arrested. He was later sentenced to 300 months in prison and ordered to pay more than $179 million in restitution.

The SEC alleges that the sales agents misrepresented to investors that their money would be used to make high-interest bridge loans to commercial borrowers or businesses that accepted credit cards. Little, if any, investor money actually went toward this purpose. Investor funds were instead used for Ponzi scheme payments and the agents’ sales commissions, and Cosmo lost $80 million while trading futures in personal accounts. Meanwhile, the sales agents assuredly offered and sold Agape securities to investors despite numerous red flags of fraud including Cosmo’s prior conviction for fraud, the too-good-to-be-true returns, and the incredible safety of principal promised to investors. The sales agents also ignored Agape’s relatively small and unknown status as a private issuer of securities, Agape’s series of extensions and defaults, and other dire warnings about Agape’s financial condition. None of the Agape securities offerings were registered with the SEC.

The SEC’s complaint charges the following sales agents:
Brothers Bryan Arias and Hugo A. Arias of Maspeth, N.Y., who offered and sold Agape securities to at least 195 and 1,419 investors respectively. They received more than $9.5 million combined in commissions and payments.

Brothers Anthony C. Ciccone of Locust Valley, N.Y. and Salvatore Ciccone of Maspeth, N.Y., who offered and sold Agape securities to at least 535 and 348 investors respectively. They received more than $17 million combined in commissions and payments.

Brothers Jason A. Keryc of Wantagh, N.Y. and Michael D. Keryc of Baldwin, N.Y. Jason Keryc offered and sold Agape securities to at least 1,617 investors and received at least $16 million in commissions and payments. He also paid sub-brokers, including his brother, at least $7.4 million to sell Agape securities for him. Michael Keryc offered and sold Agape securities to at least 177 investors and received more than $1 million in commissions and payments.

Siblings Martin C. Hartmann III of Massapequa, N.Y. and Laura Ann Tordy of Wantagh, N.Y. Hartmann enlisted his sister in his sales effort while he worked as a sub-broker for Jason Keryc. Hartmann and Tordy offered and sold Agape securities to at least 441 investors and received more than $3.5 million in commissions and payments.

Christopher E. Curran of Amityville, N.Y., who worked as a sub-broker for Keryc. Curran offered and sold Agape securities to at least 132 investors and received at least $531,890 in commissions and payments.

Ryan K. Dunaske of Ronkonkoma, N.Y., who worked as a sub-broker for Keryc. Dunaske offered and sold Agape securities to at least 70 investors and received more than $700,000 in commissions and payments.

Michael P. Dunne of Massapequa, N.Y., who worked as a sub-broker for Keryc. Dunne offered and sold Agape securities to at least 99 investors and received more than $1.5 million in commissions and payments.

Diane Kaylor of Bethpage, N.Y., who offered and sold Agape securities to at least 249 investors and received at least $3.7 million in commissions and payments.

Anthony Massaro of Boynton Beach, Fla., who offered and sold Agape securities to at least 826 investors and received more than $5.9 million in commissions and payments.

Ronald R. Roaldsen, Jr. of Wantagh, N.Y., who worked as a sub-broker for Keryc. Roaldsen offered and sold Agape securities to at least 159 investors and received more than $600,000 in commissions and payments.

The SEC’s complaint charges Bryan and Hugo Arias, Anthony and Salvatore Ciccone, Jason and Michael Keryc, Dunne, Hartmann, Kaylor, Massaro, and Tordy with violations of Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint charges all 14 defendants with violations of Section 15(a) of the Exchange Act, and Sections 5(a) and 5(c) of the Securities Act.

The SEC thanks the U.S. Attorney’s Office of the Eastern District of New York and the Federal Bureau of Investigation for its assistance in this matter. Anthony Ciccone, Kaylor, Jason Keryc, and Massaro have previously been arrested on a criminal complaint charging each of them with conspiracy to commit mail fraud based on their conduct as Agape sales agents. The SEC also acknowledges the assistance of the U.S. Postal Inspection Service and the Commodity Futures Trading Commission.

The SEC’s investigation was conducted by Celeste Chase, Philip Moustakis, and Yvette Panetta in the New York Regional Office. The SEC’s related examination that led to the enforcement case was conducted by Richard A. Heaphy, Yvette Q. Panetta, Dawn M. Sacco, Joseph P. DiMaria, James E. Anastasia, Marianne Cala, and Steven Gilchrist. The SEC’s litigation will be led by Paul G. Gizzi and Mr. Moustakis.

CFTC CHARGES MAN AND COMPANY WITH RUNNING A SILVER BULLION PONZI SCHEME

FROM:  COMMODITY FUTURES TRADING COMMISSION
CFTC Charges Ronnie Gene Wilson of South Carolina and His Company, Atlantic Bullion & Coin, Inc., with Operating a $90 Million Silver Bullion Ponzi Scheme

Defendants are allegedly to have fraudulently sold contracts of sale of silver in a nationwide scheme
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a federal civil enforcement action charging defendants Ronnie Gene Wilson (Wilson) and Atlantic Bullion & Coin, Inc. (AB&C), both of Easley, S.C., with fraud in connection with operating a $90 million Ponzi scheme, in violation of the Commodity Exchange Act (CEA) and CFTC regulations.

The CFTC’s complaint charges violations under the agency’s new Dodd-Frank authority prohibiting the use of any manipulative or deceptive device, scheme, or contrivance to defraud in connection with a contract of sale of any commodity in interstate commerce in violation of Section 6(c)(1) of the CEA, as amended, to be codified at 7 U.S.C. §§ 9, 15 and the CFTC’s implementing Regulation 180.1 (a). The complaint was filed on June 6, 2012, in the U.S. District Court for the Southern District of South Carolina, Anderson Division.

According to the complaint, since at least 2001 through February 29, 2012, Wilson and AB&C operated a Ponzi scheme, and, as part of the scheme, fraudulently offered contracts of sale of silver, a commodity in interstate commerce. Through their 11-year long scheme, the defendants allegedly fraudulently obtained at least $90.1 million from at least 945 investors for the purchase of silver.

From August 15, 2011, through February 29, 2012 – the time period during which the CFTC has had jurisdiction over the defendants’ actions under new provisions contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 – the defendants allegedly fraudulently obtained at least $11.53 million from at least 237 investors in 16 states for the purchase of contracts of sale of silver. The complaint further alleges that during this period, the defendants failed to purchase any silver whatsoever. Instead, the defendants allegedly misappropriated all of the investors’ funds and to conceal their fraud, issued phony account statements to investors.

In its continuing litigation, the CFTC seeks restitution to defrauded investors, a return of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the federal commodities laws.

The CFTC appreciates the cooperation and assistance of the U.S. Attorney’s Office in Greenville, S.C., and the U.S. Secret Service.

CFTC Division of Enforcement staff responsible for this case are A. Daniel Ullman II, George H. Malas, Antoinette Chance, John Einstman, Richard Foelber, Paul G. Hayeck, and Joan M. Manley.

SEC CHARGES NORTHERN CALIFORNIA FUND MANAGER IN $60 MILLION SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
May 24, 2012
On May 24, 2012, the Securities and Exchange Commission charged an investment adviser in Scotts Valley, Calif., with running a $60 million investment fund like a Ponzi scheme and defrauding investors by touting imaginary trading profits instead of reporting the actual trading losses he had incurred.

The SEC alleges that John A. Geringer, who managed the GLR Growth Fund (Fund), used false and misleading marketing materials to lure investors into believing that the Fund was earning double-digit annual returns by investing 75% of its assets in investments tied to well-known stock indices like the S&P 500, NASDAQ, and Dow Jones. In reality, Geringer’s trading generated consistent losses and he eventually stopped trading entirely. To mask his fraud, Geringer paid millions of dollars in “returns” to investors largely by using money received from newer investors. He also sent investors periodic account statements showing fictitious growth in their investments.

According to the SEC’s complaint filed in federal court in San Jose, Geringer raised more than $60 million since 2005, mostly from investors in the Santa Cruz area. Geringer used fraudulent marketing materials claiming that the Fund had between 17 and 25 percent annual returns in every year of the Fund’s operation through investments tied to major stock indices. Although the Fund was started in 2003, marketing materials claimed 25 percent returns in 2001 and 2002 – before the Fund even existed. The marketing materials also falsely indicated a nearly 24 percent return in 2008 from investing mainly in publicly traded securities, options, and commodities, while the S&P 500 Index lost 38.5 percent.
The SEC alleges that Geringer’s actual securities trading was unsuccessful, and by mid-2009 the Fund did not invest in publicly traded securities at all. Instead, the Fund invested heavily in illiquid investments in two private startup technology companies. The rest of the money was paid to investors in Ponzi-like fashion and to three entities Geringer controlled that also are charged in the SEC’s complaint.

According to the SEC’s complaint, Geringer further lied to investors on account statements that falsely claimed “MEMBER NASD AND SEC APPROVED.” The SEC does not “approve” funds or investments in funds, nor was the Fund (or any related entity) a member of the NASD (now called the Financial Industry Regulatory Authority – FINRA). Geringer also falsely claimed that the Fund’s financial statements were audited annually by an independent accountant. No such audits were performed.

The SEC’s complaint alleges Geringer and three related entities violated or aided and abetted violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and Section 206(1), (2), and (4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The complaint also alleges the defendants violated or aided and abetted violations of Section 26 of the Exchange Act, which bars persons from claiming the SEC has passed on the merits of a particular investment. The SEC’s complaint names the Fund as a relief defendant. The complaint seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains, civil monetary penalties, and other relief. Geringer, the Fund, and two of the GLR entities consented to the entry of a preliminary injunction and a freeze on the Fund’s bank account.

The SEC’s investigation, which is continuing, has been conducted by Robert J. Durham and Robert S. Leach of the San Francisco Regional Office. The SEC’s litigation will be led by Sheila O’Callaghan of the San Francisco Regional Office.
The SEC thanks the U.S. Attorney’s Office for the Northern District of California, Federal Bureau of Investigation, and FINRA for their assistance in this matter.

SEC CHARGES TWO FLORIDA RESIDENTS WITH ALLEGED RUNNING A $157 MILLION PONZI SCHEME

FROM:  SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., May 22, 2012 — The Securities and Exchange Commission today charged two individuals who provided the biggest influx of investor funds into one of the largest-ever Ponzi schemes in South Florida.

The SEC alleges that George Levin and Frank Preve, who live in the Fort Lauderdale area, raised more than $157 million from 173 investors in less than two years by issuing promissory notes from Levin's company and interests in a private investment fund they operated. They used investor funds to purchase discounted legal settlements from former Florida attorney Scott Rothstein through his prominent law firm Rothstein Rosenfeldt and Adler PA. However, the settlements Rothstein sold were not real and the supposed plaintiffs and defendants did not exist. Rothstein simply used the funds in classic Ponzi scheme fashion to make payments due other investors and support his lavish lifestyle. Rothstein's Ponzi scheme collapsed in October 2009, and he is currently serving a 50-year prison sentence.

The SEC alleges that Levin and Preve misrepresented to investors that they had procedural safeguards in place to protect investor money when in fact they often purchased settlements without first seeing any legal documents or doing anything to verify that the settlement proceeds were actually in Rothstein's bank accounts. Moreover, as the Ponzi scheme was collapsing and Rothstein stopped making payments on prior investments, Levin and Preve sought new investor money while falsely touting the continued success of their investment strategy. With their fate tied to Rothstein, Levin and Preve's settlement purchasing business collapsed along with the Ponzi scheme.

"Levin and Preve fueled Rothstein's Ponzi scheme with the false sense of security they gave investors," said Eric I. Bustillo, Director of the SEC's Miami Regional Office. "They promised to safeguard investors' assets, but gave Rothstein money with nothing to show for it."

According to the SEC's complaint filed in federal court in Miami, Levin and Preve began raising money to purchase Rothstein settlements in 2007 by offering investors short-term promissory notes issued by Levin's company - Banyon 1030-32 LLC. In 2009, seeking additional funds from investors, they formed a private investment fund called Banyon Income Fund LP that invested exclusively in Rothstein's settlements. Banyon 1030-32 served as the general partner of the fund, and its profit was generated from the amount by which the settlement discounts obtained from Rothstein exceeded the rate of return promised to investors.

The SEC alleges that the offering materials for the promissory notes and the private fund contained material misrepresentations and omissions. They misrepresented to investors that prior to any settlement purchase, Banyon 1030-32 would obtain certain documentation about the settlements to ensure the safety of the investments. Levin and Preve, however, knew or were reckless in not knowing that Banyon 1030-32 often purchased settlements from Rothstein without obtaining any documentation whatsoever.

Furthermore, the SEC alleges that Banyon Income Fund's private placement memorandum misrepresented that the fund would be a continuation of a successful business strategy pursued by Banyon 1030-32 during the prior two-and-a-half years. Levin and Preve failed to disclose that by the time the Banyon Income Fund offering began in May 2009, Rothstein had already ceased making payments on a majority of the prior settlements Levin and his entities had purchased. They also failed to inform investors that Levin's ability to recover his prior investments from Rothstein was contingent on his ability to raise at least $100 million of additional funding to purchase more settlements from Rothstein.

The SEC's complaint seeks disgorgement of ill gotten gains, financial penalties, and permanent injunctive relief against Levin and Preve to enjoin them from future violations of the federal securities laws.

The SEC's investigation, which is continuing, has been conducted by senior counsels D. Corey Lawson and Steven J. Meiner and staff accountant Tonya T. Tullis under the supervision of Assistant Regional Director Chad Alan Earnst. Senior trial counsels James M. Carlson and C. Ian Anderson are leading the litigation.

The SEC acknowledges the assistance of the U.S. Attorney's Office for the Southern District of Florida, the Federal Bureau of Investigation, and the Internal Revenue Service.

SEC CHARGES MAN WITH HAVING A REAL ESTATE INVESTMENT PONZI SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., May 17, 2012 – The Securities and Exchange Commission today charged a New Jersey man with operating a Ponzi-like scheme involving a series of investment vehicles formed for the purported purpose of purchasing and managing rental apartment buildings in New Jersey and Pennsylvania.

The SEC alleges that David M. Connolly induced investors to buy shares in real estate investment vehicles he created through his firm Connolly Properties Inc. He promised investors monthly dividends based on cash-flow profits from rental income at the apartment buildings as well as the growth of their principal from the appreciation of the property. However, the real estate investments did not produce the projected dividends, and Connolly instead made Ponzi-like dividend payments to earlier investors using money from new investors. Connolly, who lives in Watchung, N.J., also siphoned off at least $2 million in investor funds for his personal use.

“David Connolly presented himself to investors as a successful real estate investment manager with a track record of paying consistent, high returns,” said George S. Canellos, Director of the SEC’s New York Regional Office. “In truth, Connolly’s operation was essentially a shell game intended to raise additional funds from new or existing investors in order to perpetuate his fraudulent scheme.”

The U.S. Attorney’s Office for the District of New Jersey, which conducted a parallel investigation of the matter, today announced that Connolly was indicted on one count of securities fraud among other criminal charges.

According to the SEC’s complaint filed in federal court in New Jersey, none of Connolly’s securities offerings in the investment vehicles were registered with the SEC as required under the federal securities laws. He began offering the investments in 1996 and ultimately raised in excess of $50 million from more than 200 investors in more than 25 investment vehicles. However, beginning in at least 2006, Connolly misrepresented to investors that their funds would be used exclusively for the property related to the particular vehicle in which they invested. Connolly instead commingled the funds in bank accounts that he alone controlled and used for a variety of purposes that weren’t disclosed to investors, including $2 million in payments he made to himself that vastly exceeded any dividends to which he would be entitled through his ownership stake. Between 2007 and 2010, Connolly also wrote checks to “cash” in excess of $2.5 million. Even after Connolly stopped making dividend payments to investors in April 2009, he still continued to pay himself dividends as well as a $250,000 “salary” out of investor funds.

The SEC alleges that Connolly lacked sufficient revenues from rental income at the apartment buildings, so he continued to raise millions of dollars for new investment vehicles. He used the funds to pay purported monthly cash-flow dividends in excess of 10 percent to investors in older investment vehicles. Connolly refinanced properties and improperly used the cash proceeds to continue the scheme, which ultimately collapsed in 2009 when new investor funds dried up and rental income was insufficient to support payments on the mortgages. The properties owned by the investment vehicles were forced into foreclosure, wiping out the equity of the investors.

The SEC’s complaint charges Connolly with violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC’s complaint seeks permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.

The SEC’s investigation was conducted by Justin Smith and William Edwards in the New York Regional Office. Jack Kaufman will lead the litigation.

The SEC thanks the U.S. Attorney’s Office for the District of New Jersey, the Federal Bureau of Investigation, 

and the Internal Revenue Service for their assistance in this matter.

SEC CHARGES "SOCIAL CAPITALIST" WITH RUNNING A PONZI SCHEME

FROM:  SEC
Washington, D.C., April 12, 2012 — The Securities and Exchange Commission today charged a self-described “Social Capitalist” with running a Ponzi scheme that targeted socially-conscious investors in church congregations.

The SEC alleges that Ephren W. Taylor II made numerous false statements to lure investors into two investment programs being offered through City Capital Corporation, where he was the CEO. Instead of investor money going to charitable causes and economically disadvantaged businesses as promised, Taylor secretly diverted hundreds of thousands of dollars to publishing and promoting his books, hiring consultants to refine his public image, and funding his wife’s singing career.

The SEC also charged City Capital and its former chief operating officer Wendy Connor, who lives in North Carolina and along with Taylor received hundreds of thousands of dollars from investors in salary and commissions.

“Ephren Taylor professed to be in the business of socially-conscious investing. Instead, he was in the business of promoting Ephren Taylor,” said David Woodcock, Director of the SEC’s Fort Worth Regional Office. “He preyed upon investors’ faith and their desire to help others, convincing them that they could earn healthy returns while also helping their communities.”

According to the SEC’s complaint filed in federal court in Atlanta, Taylor strenuously cultivated an image of a highly successful and socially conscious entrepreneur. He marketed himself as “The Social Capitalist” and touted that he was the youngest black CEO of a public company and the son of a Christian minister who understands the importance of giving back. He authored three books and appeared on national television programs, and promoted his investment opportunities through live presentations, Internet advertisements, and radio ads. For instance, Taylor conducted a multi-city “Building Wealth Tour” during which he spoke to church congregations including Atlanta’s New Birth Church and at various wealth management seminars.

The SEC alleges that Taylor and City Capital offered two primary investments: promissory notes supposedly funding various small businesses, and interests in “sweepstakes” machines. In addition to promising high rates of return, Taylor assured investors that he had a long track record of success and that investor funds would be used to support businesses in economically disadvantaged areas. A portion of profits were to go to charity. Taylor devoted considerable time to denigrating traditional investment vehicles such as CDs, mutual funds, and the stock market, labeling them as “foolish” and “money losers.” He told audiences they could make far greater returns using their self-directed IRAs for investments in small businesses and sweepstakes machines offered by City Capital.

In reality, according to the SEC’s complaint, more than $11 million that Taylor and City Capital raised from hundreds of investors nationwide from 2008 to 2010 was instead used to operate the Ponzi scheme. Investor money was misused to pay other investors, finance Taylor’s personal expenses, and fund City Capital’s payroll, rent, and other costs. City Capital’s business ventures were consistently unprofitable, and no meaningful amounts of investor money were ever sent to charities.

The SEC’s complaint seeks disgorgement, financial penalties and permanent injunctive relief against City Capital, Taylor, and Connor as well as officer and director bars against Taylor and Connor.