This week the US Securities and Exchange Commission charged two Florida men with operating a $22 million Ponzi scheme disguised as a private equity fund.
More than 100 investors, primarily made up of Florida teachers and retirees, were duped by promises of annual returns high as 124 percent.
James Risher, who spent 11 of the last 21 years in jail on similar charges, was responsible for handling the fund’s trading operations, according to the SEC’s complaint filed in a Florida District Court. His partner, Daniel Sebastian, was responsible for soliciting investors through his network of contacts as a former insurance broker.
From 2007 through July 2010, Sebastian allegedly provided investors with fund marketing materials and newsletters touting Risher’s credentials as a fund manager. Promotional events, DVDs and golf tournaments were used to attract new investors.
At an Orlando event held in March 2010 Sebastian allegedly told investors in a speech, “[Y]ou invest in this fund and all of a sudden you start making more money than you’ve ever made in your life with your investors. And then all of a sudden you start making enough money where you don’t have to go to work.”
Risher and Sebastian allegedly used investor commitments to purchase jewellery, gifts and real property. Only $2.5 million of the $22 million raised was ultimately placed in brokerage accounts for investment, according to court documents.
Phony auditing statements from a non-existent Bermudan auditor were allegedly supplied to investors as part of the scam. Reporting statements were also scant on details, such as trades executed and investment holdings and further promised investors against any loss on their principal investments, court documents said.