Tuesday, June 16, 2009
I frankly have become bored with the SEC's recent proliferation of enforcement actions against ponzi schemes, but here is an interesting one:
The SEC announced that on June 15, 2009, it filed an emergency civil action in the United States District Court for the Northern District of Illinois against David J. Hernandez, also doing business as “NextStep Financial Services, Inc.,” for conducting a Ponzi scheme which raised more than $11 million from investors in at least 12 states with false promises that their investments would earn guaranteed returns of 10% to16% per month with no risks. The SEC’s complaint alleges that between at least February 2008 and the present, Hernandez, a convicted felon, solicited investors to purchase “guaranteed investment contracts” by making false and misleading statements about his background, the existence of the company that issued the investments, the uses of investor proceeds and the safety of the investments. The complaint alleges that Hernandez sold the “guaranteed investment contracts” in person and through NextStep Financial’s website and claimed that he had an extensive background in banking and business, including having business and law degrees, and that NextStep Financial was a successful company that invested in payday advance stores. The complaint further alleges that Hernandez told investors that their investments were safe because they were covered by insurance. According to the complaint, however, none of this was true; indeed, his “banking experience” included a prior federal conviction for wire fraud.
The SEC’s complaint charges Hernandez with multiple securities violations and seeks injunctive relief, disgorgement plus prejudgment interest and civil penalties against Hernandez. The SEC also seeks to recover assets from several relief defendants.