Thursday, October 25, 2007

Repeat After Me: "If It Sounds Too Good to Be True . . . "

The SEC filed a civil fraud action that includes a temporary asset freeze for what is describes as a Ponzi scheme executed by Calypso Financial, LLC and related entities.  The lure to purchase the notes was the promise of monthly returns of 4% to 15%, which works out to a compound annual rate of return of over 50% to an amount in excess of 200%.  You can't get those types of returns from any legitimate investment, at least not on a regular basis.  The SEC Litigation Release (here) describes the case:

The complaint alleges the defendants have obtained investments of at least $20 million from the fraudulent offering of notes issued by Calypso and the other six entities, all of which are controlled by Petersen. The defendants allegedly promised returns to investors of 4% to 15% a month ostensibly through investments in real estate. However, it is alleged that the defendants actually operated a Ponzi scheme in which returns paid to earlier investors were paid from funds invested by new investors.

It's not clear how much money was frozen by the court, but it is usually the case that any amount recovered will not come close to covering the investor losses, especially the late-comers to the party.  (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2007/10/repeat-after-me.html

Civil Enforcement, Fraud, Securities | Permalink

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