Among recent enforcement actions taken by the SEC were charges against a Colorado man who called himself an institutional trader after allegedly defrauding elderly investors in a phony investment scheme; a penny stock financier and his firms for failing to register billions of shares of microcap companies that they bought and then resold; an advisory firm and portfolio manager who misrepresented risk, exposure and diversification to trustees; and an oil field services company for violations of the Foreign Corrupt Practices Act (FCPA) including bribes, travel and entertainment for foreign officials.
Colorado Man Charged by SEC With Bilking Elderly Investors to Pay His Mortgage
Gary Snisky of Longmont, Colo., was charged by the SEC with defrauding elderly investors into making what he told them were investments in government-secured bonds. He then used their money to pay his mortgage.
According to the SEC, Snisky, a self-described institutional trader, primarily targeted retired annuity holders by using insurance agents to sell interests in his company Arete LLC, which were pitched as a safe and more profitable alternative to an annuity. Investors were told their funds would be used to purchase government-backed agency bonds at a discount, and Snisky as an institutional trader would use the bonds to engage in overnight banking sweeps.
But Snisky never bought any bonds or did any trading. Instead he spent about $2.8 million of investor funds to pay commissions to his salespeople and make personal mortgage payments.
Snisky brought in at least $3.8 million from more than 40 investors, not just in Colorado but also in several other states. Beginning in August 2011, he recruited veteran insurance salespeople who could sell the Arete investment to their established client bases that owned annuities. The majority of investors in Arete used funds from IRAs or other retirement accounts.
He described Arete as an "annuity-plus" investment in which, unlike typical annuities, investors could withdraw principal and earned interest with no penalty after 10 years while still enjoying annuity-like guaranteed annual returns of 6%–7%.
Snisky made up everything he said about the "investment," creating his own sales brochures and documentation. He did such a good job of pitching that one of his own salespeople actually put money into the bogus investment.
The SEC seeks a permanent injunction, disgorgement of ill-gotten gains plus prejudgment interest, and a financial penalty. Its investigation is continuing.
In a parallel action, the U.S. Attorney's Office for the District of Colorado also announced criminal charges against Snisky.
Penny Stock Financier to Pay $1.4 Million to Settle SEC Charges
Curt Kramer and his firms Mazuma Corp., Mazuma Funding Corp., and Mazuma Holding Corp. have agreed to pay $1.4 million — disgorgement totaling $1,061,367 plus prejudgment interest of $128,611 and penalties totaling $273,000 — to settle SEC charges that they bought billions of shares in two microcap companies and then failed to register them before resale.
Kramer and his firms bought unregistered shares in penny stock issuers Laidlaw Energy Group and Bederra Corp. For the Laidlaw transactions, more than 2 billion shares, they claimed an exemption in Rule 504 of Regulation D that permits certain companies to offer and sell up to $1 million in unregistered shares. But the Mazuma firms' purchases of Laidlaw shares exceeded Rule 504's $1 million limit, which meant the exemption did not apply.
Mazuma Holding Corp.'s acquisition and sale of more than 1 billion unregistered shares of Bederra that had been misappropriated from the issuer by its transfer agent also were not exempt from registration.
In both cases Kramer and his firms obtained the shares at a substantial discount, and in neither case were the shares registered.
