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Univ. of Toledo College of Law

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Tuesday, May 20, 2008

SEC Obtains Relief Against $72 Million Ponzi Scheme

On May 16, 2008, the SEC obtained Orders of Preliminary Injunction and Other Relief (Orders) from the United States District Court for the Eastern District of Michigan against Gregory N. McKnight (McKnight) and Legisi Holdings, LLC (Legisi), pursuant to their consent. The Orders preliminarily enjoin the Defendants from violating the anti-fraud and registration provisions of the federal securities laws in connection with a $72 million Ponzi scheme. The Orders also continue the asset freezes and certain other ancillary relief previously ordered by the Court.

The SEC alleged that McKnight and Legisi Holdings conducted a fraudulent, unregistered offering of securities in which they raised approximately $72 million from more than 3,000 investors in all 50 states and several foreign countries through the Legisi website.  The SEC alleged that McKnight represented that he would invest the offering proceeds in foreign currencies, commodity futures, stocks and real estate and promised to pay interest of as much as 15 percent per month from the profits from his investments.  The complaint charges that, contrary to these representations, McKnight invested only approximately $33 million of the offering proceeds and that, rather than earning profits, these investments resulted in millions of dollars in losses. The Commission's complaint further charges that Defendants used approximately $27.5 million of the offering proceeds to make payments of purported profits to prior investors and were, thus, operating a Ponzi scheme, and that McKnight used $2.2 million of investor funds to pay for his personal expenses and to make payments to his relatives, Jennifer McKnight, Danielle Burton, and Theresa Burton.

The Orders preliminarily restrain and enjoin McKnight and Legisi from violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The Orders also, among other things, continue the freeze of McKnight's and Legisi's assets and the freeze of Legisi investor funds wherever located.

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Comments

It was a lot easier to see this one coming than the Madoff case.
Only idiots would have sent money to these people.

Posted by: Slick Click | Mar 15, 2009 10:02:20 AM

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