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Univ. of Toledo College of Law

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Wednesday, September 2, 2009

SEC Charges Investment Adviser with Ponzi Scheme Directed at California Church Community

The SEC charged David A. Souza and his company, D.A. Souza Investments, LLC for conducting a fraudulent investment scheme that targeted a Redding, California church community. In a nine-month period during 2007 and 2008, according to the SEC's complaint, Souza raised more than $1 million from approximately 28 investors by touting his supposedly phenomenal skill in investing. Souza allegedly took advantage of investors' trust by appealing to their religious faith with slogans such as "Where Business Is Moral and the Miraculous Is Routine."

In reality, the SEC's complaint alleges, Souza never invested any of the money he received from investors. Instead, he diverted most of the investors' money to expenditures designed to create the false appearance of a successful business operation. Souza used another portion of the money to pay certain investors fictitious high returns in the style of a Ponzi scheme, and he used the remainder to pay his personal living expenses.

The SEC's complaint charges Souza and D.A. Souza Investments, LLC with violations of the antifraud and registration provisions of the federal securities laws under 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; and as to Souza, Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The complaint seeks civil injunctive relief and disgorgement of ill-gotten gains from each defendant, and civil penalties from Souza.

http://lawprofessors.typepad.com/securities/2009/09/sec-charges-investment-adviser-with-ponzi-scheme-directed-at-california-church-community.html

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