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

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Wednesday, May 26, 2010

SEC Charges New York City Investment Co. with Affinity Fraud

Yet another affinity-based fraud, this one out of New York City:

The SEC charged Gedrey Thompson, a purported money manager, and his New York City-based investment company and two of his associates with conducting an affinity fraud and Ponzi scheme that specifically targeted investors living in the Caribbean and African-American communities of Brooklyn.

The SEC alleges that Thompson, through his firm GTF Enterprises Inc., convinced investors to entrust him with money that he claimed to trade on their behalf. Thompson assured investors that the investments were risk-free and employed "stop-loss" trading techniques, and he guaranteed quarterly returns ranging from 4 to 20 percent.

However, Thompson allegedly invested only a fraction of investor funds and sustained thousands of dollars in trading losses from those investments. He sent investors fake quarterly account statements that hid those losses and instead showed lofty returns. Thompson also made Ponzi-like payments to earlier investors, and he stole thousands of dollars in investor funds to pay for exotic trips and other personal expenses. GTF's account manager Dean Lewis and assistant treasurer Sezzie Goodluck also are charged in the fraud that caused many investors in GTF to lose their life savings.

According to the SEC's complaint, filed in U.S. District Court for the Southern District of New York, Thompson with assistance from Lewis and Goodluck raised a total of more than $800,000 from at least 20 investors from at least 2004 to 2009. Thompson primarily sought investors who were similarly from the Caribbean and now living in the New York area, convincing them to entrust him with their money that he claimed to trade on their behalf in options, futures, commodities, or other securities.

http://lawprofessors.typepad.com/securities/2010/05/sec-charges-new-york-city-investment-co-with-affinity-fraud.html

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