The following is from the SEC website:
September 23, 2011
“The Securities and Exchange Commission today charged two San Francisco-area men with fraud for offering investors extraordinary returns as high as 6,300 percent when instead their money was spent on multi-million dollar home improvements and other luxuries.
The SEC alleges that Jason G. Rivera, Jr., Marc C. Harmon, and two companies controlled by Rivera raised nearly $8 million from investors in two separate schemes, one involving purported trading in gold and diamonds and the other involving purported trading in collateralized mortgage obligations (CMOs). However, the funds raised from investors weren’t used for those purposes as Rivera diverted most of the money for his personal exploits, including a $360,000 surprise birthday party for his wife.
According to the SEC’s complaint filed in federal court in San Francisco, Rivera previously worked in real estate and portrayed himself to investors as a successful financier. He raised approximately $4.5 million from investors in 2007 and 2008 through his company, the Joseph Rene Corporation (JRC). He touted JRC as a route to “financial freedom” and “maximum results with minimum risk” in a brochure he distributed to investors, assuring them high returns by pooling investor money and placing it in “hard assets” such as real estate, oil, diamonds, and gold. However, as Rivera instead spent investor money as his own and was unable to make payments to investors as promised, he tried to placate them with falsehoods. For example, Rivera claimed in a June 2008 e-mail to JRC investors that glitches in the banking system had delayed their payouts, but “your money is still making money.” In a follow-up e-mail, he maintained that despite the worldwide financial downturn, JRC was “thriving,” had “lost NO money,” and all investor funds were “safe.”
The SEC alleges that Rivera later teamed up with Harmon, an unemployed construction worker at the time who had no training or experience in selling or managing investment programs. Together they raised an additional $3.2 million from 2008 to 2010 through a second company, Executive Members Management Group (EMMG). Rivera and Harmon led investors to believe they could make rapid profits of up to 6,300 percent by investing in trading programs involving CMOs and other financial instruments. Specifically, Harmon falsely claimed that EMMG used “licensed traders” and “trading platforms,” and he falsely boasted to investors that extremely wealthy individuals had invested millions of dollars with EMMG. Harmon even lied to several investors about a phony trip he took to the United Kingdom in an effort to place their money in a trading program.
In both schemes, the SEC alleges that Rivera used investor funds to afford such personal luxuries as several Mercedes Benz automobiles, jewelry, restaurant meals, and basketball season tickets. Rivera misused investor funds in the JRC scheme to pay for approximately $1.5 million in improvements to his 8,000-square foot home in Alamo, Calif. He later misused investor funds in the EMMG scheme to make $1.1 million in additional improvements to his home. Rivera also paid approximately $180,000 to Harmon.
The complaint charges Rivera, Harmon, JRC, and EMMG 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 (Exchange Act) and Rule 10b-5 thereunder. The complaint also charges Rivera with violating Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and Harmon with violating Section 15(a)(1) of the Exchange Act. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and civil monetary penalties.”
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