The Securities and Exchange Commission (SEC) announced in September a court order that halted what the SEC referred to as "an ongoing Ponzi-like scheme" that fraudulently collected more than $345 million from over 230 investors across the U.S.
In the order, the SEC alleges that Kevin B. Merrill, Jay B. Ledford, and Cameron Jezierski enticed investors with promises of substantial profits that were to be earned through the purchase and resale of consumer debt portfolios, which turned out to have been an elaborate fabrication.
The SEC further alleged that Merrill, Ledford, and Jezierski made Ponzi-like payments to earlier investors while skimming an estimated $85 million to finance lavish lifestyles, including the purchase of an abundance of luxury goods for themselves.
SEC Alleges "Brazen Fraud" in Sept. 13 Complaint
The Associate Director of the SEC's Philadelphia Regional Office, Kelly L. Gibson, said in a statement:
"We allege that the defendants engaged in a brazen fraud, deceiving investors to perpetuate their wrongdoing and line their pockets with ill-gotten gains. Investors should be warned that low-risk, high-return investments that never lose should be a red flag."
In connection with the order, the SEC also obtained an emergency asset freeze and the appointment of a receiver. Additionally, the SEC seeks disgorgement of any ill-gotten gains and prejudgment interest, and additional financial penalties.
The U.S. Attorney's Office for the District of Maryland has also filed criminal charges against Merrill, Ledford, and Jezierski.
More details are available in the SEC's full press release - read here.
Conducting Due Diligence - Increased Vigilance Is Recommended
This case reinforces the importance of registered investment advisers (RIAs) conducting thorough due diligence when recommending third-party investments to clients. It is crucial that third-party advisers be vetted in order for RIAs to avoid being unintentionally caught up in questionable activity.
In addition, due diligence needs to be performed in determining the integrity of the security investment product itself.
It is important to note that this is the
2nd such action against alleged Ponzi schemes in a matter of months, which would demonstrate increased SEC scrutiny of potentially fraudulent activities, which could involve both intentional and unintentional acts.
With that in mind, the strongest vigilance on the part of all investment advisors is highly recommended.
Help Is Available - Contact Our Due Diligence Experts
At Jacko Law Group (JLG), our attorneys have a sophisticated understanding of the securities industry.
We use that experience to advise RIAs performing due diligence in preparation for business transactions, fund formation, corporate mergers, and securities purchases to ensure compliance with federal securities regulations.
Contact us here for assistance with due diligence or other legal issues that arise.
