SEC headquarters in Washington. (Photo: Diego M. Radzinschi/ALM)
The Securities and Exchange Commission halted an ongoing investment fraud targeting members of the Jewish community, primarily in the Los Angeles region.
The SEC filed an emergency action in federal court against Motty Mizrahi and MBIG Co., his sole proprietorship, alleging that they defrauded at least 15 advisory clients out of more than $3 million since June 2012.
According to the SEC's complaint, prospective clients know Mizrahi either from their Los Angeles-area synagogue or were introduced to him through family and friends in the Israeli American community. Mizrahi advertised himself to advisory clients as a professional money manager, licensed broker and certified public accountant. However, Mizrahi has no broker registration, nor a CPA license.
The SEC says Mizrahi falsely claimed that MBIG used sophisticated trading strategies to generate "guaranteed" returns of between2%-3% per month, the investments were risk-free, and clients would not lose their money and could withdraw their funds at any time.
Unbeknownst to his clients, however, MBIG had no bank or brokerage account of its own — rather, clients unwittingly sent money to Mizrahi's personal bank account.
Mizrahi used the money to fund his personal brokerage account, in which he engaged in high-risk options trading producing losses of more than $2.2 million. From that account, Mizrahi transferred at least $1.4 million to his personal bank account to make payments for personal expenses — notwithstanding that his compensation was to derive from a percentage of trading "profits," of which he had none, according to the SEC.
The SEC alleges that Mizrahi covered up his fraud by issuing MBIG's clients fabricated account statements, showing positive account balances and profits from trading. When clients demanded proof of MBIG's securities holdings, Mizrahi showed them brokerage statements reflecting a multi-million dollar balance for a fictitious MBIG brokerage account.
On March 27, a judge granted emergency relief, including a temporary restraining order against the defendants and an order freezing their assets.
In a parallel action, the U.S. Attorney's Office for the Central District of California announced it filed wire fraud charges against Motty Mizrahi and another individual.
SEC Charges Maine Resident With Fraud in $3M Christian Concert Scheme
The SEC filed an enforcement action charging concert promoter Jeffrey Wall and his business, The Lighthouse Events LLC, with defrauding over 100 investors he solicited to become "financial partners."
For more than four years, from approximately January 2014 through October 2018, Wall and Lighthouse raised more than $3 million from approximately 145 investors to promote Christian music concerts and festivals in the New England area, according to the SEC's complaint.
As alleged, Wall and Lighthouse falsely told potential investors that their funds would be used solely to promote and host Christian music concerts and festivals, claiming that repayment of the investment was "secured" and "guaranteed" within one year of the initial investment.
Instead, they used investor funds for other expenses, including payment of Lighthouse's existing debt and payments to earlier investors using later investors' money.
According to the complaint, Wall and Lighthouse also failed to disclose material information to potential investors about Lighthouse's deteriorating financial condition from declining ticket sales and its growing high-interest debt from short-term loans. Wall and Lighthouse have failed to repay approximately $1.6 million of the money fraudulently collected from investors.
