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Blotter: July 2012

Don’t Feed the Ponz

Two of the biggest feeders for one of the biggest-ever Ponzi schemes in South Florida were busted in late May. The SEC charged George Levin and Frank Preve, who live in the Fort Lauderdale area, with misleading investors about the safety of their investments. Levin and Preve raised more than $157 million from 173 investors over two years, selling them promissory notes in Levin’s firm and interests in a private investment fund they controlled. They then used the investor funds to purchase fake legal settlements from Scott Rothstein through his law firm, which operated a $1.2 billion Ponzi scheme that collapsed in October 2009. In spite of promises to investors that they would obtain specific documentation about the settlements to ensure their safety, Levin and Preve often purchased the settlements without any documentation at all. Rothstein is currently serving a 50-year prison sentence, and the SEC’s investigation of that Ponzi scheme is ongoing.

No Skin in This Game

If you say you have “skin in the game,” you better mean it. The SEC charged Quantek Asset Management, a Miami-based hedge fund advisor, in late May with lying to investors about whether its executives had their own personal money invested in the firm’s $1 billion Latin America-themed hedge fund. They told investors they did, but nope, they didn’t. Quantek also lied about its investment process and certain related-party transactions involving its lead executive Javier Guerra and former parent company Bulltick Capital Markets Holdings. Bulltick, Guerra, Quantek and former Quantek operations director Ralph Patino agreed to settle for $3.1 million. Guerra and Patino are barred from the securities industry.

Siblings in Crime

The SEC accused 14 sales agents, including four pairs of siblings, with running a $415 million Ponzi scheme from Long Island-based investment firm Agape World. Neither the agents nor the firm were registered with the SEC. The group of agents was charged with misleading investors—they told investors that only 1 percent of their principal was at risk—and illegally selling them non-existent securities offered by Agape. The sales agents got $52 million in commissions and payments from investor funds in return. “This Ponzi scheme spread like wildfire through Long Island’s middle-class communities,” said Andrew M. Calamari, acting regional director for the SEC’s New York regional office. According to the SEC’s complaint, more than 5,000 investors nationwide fell prey to the scheme.


TAGS: Industry
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