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Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Wednesday, January 21, 2009

SEC Gets Emergency Action Against Another Alleged Ponzi Scheme

Yet another alleged ponzi scheme -- On January 20, 2009, the U.S. District Court for the Northern District of Texas, Lubbock Division, appointed a receiver and froze the assets of a former bail bondsman who is purportedly managing a hedge fund worth at least $45 million on behalf of 31 individual investors. Defendant Rod Cameron Stringer claims that his stock trading strategy has generated annual returns as high as 61%, and total returns in excess of 600%. However, according to the SEC, Stringer has been operating a fraudulent scheme since at least 2001, during which he has misappropriated millions of dollars of investor funds to support an extremely lavish lifestyle and to make Ponzi payments to earlier investors with new investor funds. Many of Stringer's investors are elderly.

Specifically, the complaint alleges that defendant Stringer used less than 20% of the investors' funds to engage in securities transactions, and those transactions have resulted in substantial losses, not gains, as reported to investors. While Stringer's alleged fraudulent scheme began as early as 2001, an expedited investigation by the Federal Bureau of Investigation (FBI) and the Commission focused on Stringer's activities since January 2007. Since that time, the complaint alleges that Stringer raised at least $8.5 million from approximately 12 -15 investors. Contrary to Stringer's representations, only approximately $1.5 million of this amount made its way into three securities brokerage accounts, each of which is maintained in Stringer's personal name. The exact disposition of the remaining funds is presently unknown, but it is clear that Stringer used substantial amounts of investor funds to, among other things, finance a horse racing partnership, purchase a luxury boat, build a swimming pool at his office, purchase several pieces of jewelry, pay off mortgages on at least two houses, and purchase several expensive cars and trucks. Further, since January 2007, the complaint alleges that Stringer has used at least $2.4 million of the $8.5 million invested by his hedge fund clients to pay distributions and purported profits to other investors

The Court has frozen Stringer's assets and appointed a receiver to recover and conserve assets for the benefit of defrauded investors.

http://lawprofessors.typepad.com/securities/2009/01/sec-gets-emerge.html

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