ATTORNEY NEWSLETTER
Unregistered Offering Promised Returns of 20-24%
SEC Alleges Promoter Misappropriated 66% Of Funds
Thousands Spent At Casinos And Liquor Stores
The U.S. Securities and Exchange Commission (SEC) polices the financial markets to protect investors from fraud. The SEC’s Retail Strategy Task Force has especially focused on fraud against older investors and prosecuted advisors and brokers for financial elder abuse among other crimes. One particular focus is on the prosecution of Ponzi schemes, where money collected from new investors is used to pay existing investors, and there really is no actual investment of funds. Seniors are often the target of Ponzi schemes because such schemes tend to promise significant, above-market returns and seniors, concerned about having sufficient income in their later years, can be enticed by such promises. By and large, promises of high returns turn out to be false; as the saying goes, if something sounds too good to be true, it probably is. In Any event, Ponzi schemes, and similar fraudulent schemes like pump and dump schemes, violate securities laws and, when the victims are seniors, also constitute financial elder abuse and may involve other crimes. See Penal Code § 368 and Cal. Welf. & Inst. Code § 15610.30 (definition of financial elder abuse). Evans Law Firm, Inc. can represent you if you lose money in a Ponzi scheme or any other type of securities fraud or financial elder abuse in Hillsborough, San Mateo County, or elsewhere in California. If you have, call our lawyers today at (415)441-8669. Our toll-free number is 1-888-50EVANS (888-503-8267).
SEC Prosecute Promoter For Ponzi Scheme[1]
The Securities and Exchange Commission recently charged a start-up company and its president and CEO, with defrauding investors of approximately $1.6 million in an unregistered securities offering. According to the SEC’s complaint, between at least 2019 and April 2023, defendants deceived approximately 180 retail investors into giving them almost $2.5 million. The complaint alleges that defendants falsely claimed they would use investors’ money for the company’s business, principally by developing a smartphone application offering financial services to the fast-growing youth sector, and that the CEO would not take a salary. Instead, according to the complaint, the CEO misappropriated approximately $1.6 million of investor funds—66% of the total amount raised from investors—for his own use. The complaint alleges that, in return for investors’ money, defendants issued stock in the company to the investors and promised them returns on their investments as high as 20-24% in short periods via promissory notes. Defendants also allegedly used funds raised from new investors to make Ponzi-like payments to prior investors in furtherance of their fraudulent scheme.
Watch Out For “Red Flags” Of Ponzi Schemes
Here are some of the classic “red flags” of Ponzi schemes like the one involved in the reported case:
- High returns with little or no risk. Be especially suspicious of any “guaranteed” investment opportunity.
- Overly consistent/guaranteed returns. Investments tend to go up and down over time. Be skeptical about an investment that regularly generates positive returns regardless of overall market conditions.
- Unregistered investments. Ponzi schemes typically involve investments that are not registered with the SEC or with state regulators. Registration is important because it provides investors with access to information about the company’s management, products, services, and finances.
- Unlicensed sellers. Federal and state securities laws require investment professionals and firms to be licensed or registered. Most Ponzi schemes involve unlicensed individuals or unregistered firms.
- Issues with paperwork. Account statement errors may be a sign that funds are not being invested as promised.
- Difficulty receiving payments. Be suspicious if you don’t receive a payment or have difficulty cashing out. Ponzi scheme promoters sometimes try to prevent participants from cashing out by offering even higher returns for staying put.
Contact Us
If you or a loved one has been the victim of a Ponzi scheme or other form of financial elder abuse in Hillsborough or elsewhere in California contact Ingrid M. Evans at Evans Law Firm, Inc. at (415) 441-8669, or by email at <a href=”mailto:info@evanslaw.com”>info@evanslaw.com</a>. Our toll-free number is 1-888-50EVANS (888-503-8267).
[1] Evans Law Firm, Inc. was not involved in the case in any way.
