SEC files charges against investment scheme targeting seniors

Securities Enforcement SEC Elder Financial Exploitation Securities Act Securities Exchange Act

On August 17, the SEC filed a complaint against an consulting company and its owner (collectively, “defendants”) in the U.S. District Court for the District of New Jersey for allegedly making materially false and misleading statements and omitting material facts regarding a fraudulent investment scheme. According to the SEC, between February 2017 to May 2022, the owner offered and sold securities in the form of promissory notes issued by the company to at least eleven investors, ages 64 to 82, raising at least $1.2 million while promising interest rates ranging from 50 percent to 175 percent. The owner allegedly “falsely represented to at least certain of the investors that, among other things, the money they invested in the [company] would be used to make loans to other businesses, which would generate the profits used to repay the [company].” As part of the scheme, the owner is alleged to have provided conflicting explanations of the company’s business and convinced investors “to roll-over their notes into new notes combining unpaid amounts with new investments.” The SEC further alleged that instead the owner withdrew over $486,000 from the company’s bank account and used it to fund his lifestyle and pay for personal expenses. The SEC’s complaint alleges violations of the antifraud provisions of the federal securities laws, specifically, the Securities Act of 1933 and the Securities Exchange Act of 1934. The complaint seeks a permanent injunction against the defendants, disgorgement of ill-gotten gains, plus interest, penalties, bars, and other equitable relief.