SEC Charges Perpetrator of Washington-Area Ponzi Scheme

The SEC charged a Bethesda, Md. man, several family members and friends with conducting a multi-million dollar Ponzi scheme targeting investors in the Washington D.C. metropolitan area. The SEC alleges that middle-class residents were lured by false pretenses and powerpoint presentations to invest in promissory notes. Many were encouraged to refinance their homes and utilize their personal savings and retirement funds to come up with more to invest. They were promised returns as high as 20 percent per year and told their investments were protected. Instead, the companies issuing the notes were engaged in high-risk, speculative options trading and suffered massive losses. Money from new investors was used to pay the returns to earlier investors and also for personal expenses.

The SEC alleges that the Ponzi scheme defrauded more than $27 million from approximately 130 investors over a five year period. The scheme ultimately collapsed in the fall of 2010. The Bethesda man and five others have been charged.

SEC Charges Perpetrator of Washington-Area Ponzi Scheme

SEC Halts Scam Touting Access to Pre-IPO Shares of Facebook and Groupon

The SEC filed an emergency enforcement action to stop a fraudulent scheme targeting investors seeking coveted stock in Internet and technology companies like Facebook and Groupon in advance of a public offering.

Several individuals utilized a newly-minted hedge fund (The Praetorian Global Fund) to claim to own shares worth tens of millions of dollars in companies such as Facebook and Groupon. The companies targeted were expected to soon hold an initial public offering. Taking advantage of investor interest in pre-IPO shares that are virtually impossible for company outsiders to obtain, the individuals solicited funds and gave investors a false sense of comfort that their money was protected by telling them that an escrow service was receiving their funds.

Yet in reality the individuals never owned the promised pre-IPO shares in these companies. The escrow service only served to transfer investor funds to personal accounts controlled by two of the involved individuals. The funds were then used for lavish personal expenses (private jets, cars, art) and to pay off other individuals involved.

The U.S. Attorney’s Office for the Southern District of New York, which conducted a parallel investigation of the matter, filed criminal charges against the lead individual, a Florida resident. The Florida resident has been the subject of prior SEC enforcement action and several state criminal actions.

SEC Halts Scam Touting Access to Pre-IPO Shares of Facebook and Groupon

SEC Charges Feeders to Ponzi Scheme

The SEC charged two Minnesota-based hedge fund managers and their firm for facilitating a multi-billion dollar Ponzi scheme operated by a Minnesota businessman.

The SEC alleges that three parties (two individuals and a business) invested more than $600 million in hedge fund assets with the Minnesota businessman while collecting more than $42 million in fees. The Commission alleges that the three falsely assured investors and potential investors that the flow of their money would be safeguarded by the operation of collateral accounts when in reality the process did not exist as explained. When the Minnesota businessman was unable to make payments on investments held by the funds they managed, the three parties helped to conceal this by entering into secret note extensions with the Minnesota businessman. 

This is the fourth enforcement action that the SEC has brought against hedge fund managers that collectively fed billions of dollars into the Ponzi Scheme.

SEC Charges Feeders to Ponzi Scheme

Investment Adviser Charged With Fraud in NY Real Estate Funds

The SEC has charged a Monticello, N.Y.-based investment adviser with fraudulently offering and selling securities in two upstate New York real estate funds he managed.

The SEC alleges that the adviser told investors in the Gaffken & Barriger Fund (G&B Fund) that it was a relatively safe and liquid investment that generated a minimum return of 8 percent per year. However, the fund’s actual performance did not justify these performance claims. The SEC further alleges that he defrauded investors in Campus Capital Corp. by raising money from them to prop up the ailing G&B Fund without disclosing that was how their money was actually being used. The Commission also alleges that the adviser caused Campus to engage in other transactions that personally benefitted him, unbeknownst to Campus investors.

According to the SEC’s complaint filed in federal court in Manhattan, the G&B Fund raised approximately $20 million from January 1998 to March 2008, and Campus raised approximately $12 million from October 2001 to July 2008. Barriger froze the G&B Fund in March 2008 and disclosed its true financial condition to investors.

The press release contains a link to the complaint - SEC Charges Investment Adviser With Defrauding Investors in Two Upstate New York Real Estate Funds

 

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SEC Charges Father-Son Team in Hedge Fund Fraud

According to the lead paragraph in the SEC's press release, they are charging an investment adviser with securities fraud for misleading investors about the financial condition of their funds, and that they were controlling the investment decisions of the funds, when same were controlled by a third party.

Overstating your asset values by as much as $160 million certainly smells like a fraud, but not telling investors who is actually managing the investments is a fraud? It certainly can be, but is it.

If the person controlling the investments has been charged with securities fraud, and has had his assets frozen, that omission may very well be fraud. It could be a material part of an investor's decision to invest, and depending on the circumstances; a fraud.

We will have to see if the SEC can prove its allegations, but for now, the complaint is linked at its press release.  More>>>

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