Attorneys at the Securities and Exchange Commission have filed litigation against two Florida men alleging that they defrauded teachers and retirees in a $22 million Ponzi scheme by posing as a private equity fund. Read more about it here.
On July 15, 2011, the Securities and Exchange Commission (“SEC”) announced that it had filed a complaint against First Capital Savings & Loan, Ltd. (“First Capital”) alleging that the firm defrauded investors by promising high fixed rates of return from foreign currency trading. The SEC alleges that
First Capital conducted little foreign currency trading, lost money on the little trading that it conducted, and never engaged in any profitable business operations. Instead, after transferring investors’ money to an off-shore account, Lowrance and First Capital secretly diverted investor funds to pay fake returns to other, earlier investors in the classic modus operandus of a “Ponzi scheme.”
SEC v. First Capital Savings & Loan, Ltd., No. 11-CV-3451 (N.D. Cal.)
A Florida federal court has defined a Ponzi Scheme as follows: “A Ponzi scheme is a ‘phony investment plan in which monies paid by later investors are used to pay artificially high returns to the initial investors, with the goal of attracting more investors.’ In order to prove the existence of a Ponzi scheme, the Receiver must establish that: (1) deposits were made by investors; (2) the Receivership Entities conducted little or no legitimate business operations as represented to investors; (3) the purported business operations of the Receivership Entities produced little or no profits or earnings; and (4) the source of payments to investors was from cash infused by new investors.” 611 F. Supp. 2d 1299 (M.D. Fla. 2009) (citations omitted).