The Securities and Exchange Commission on Thursday announced fraud charges against a Spokane Valley, Wash., company and its owner for misleading investors with claims to raise billions in investment capital under the Jumpstart Our Business Startups (JOBS) Act and invest it exclusively in American businesses.
The SEC alleges that Daniel F. Peterson and his company, USA Real Estate Fund 1, promised investors that they could reap spectacular returns from an upcoming offering in a “secured” product backed by prominent financial firms.
The SEC action against Peterson and his company comes before the agency has even finished its rules under the JOBS Act.
According to the SEC, Peterson repeatedly told investors that the 2012 JOBS Act would enable him to raise billions of dollars by advertising the offering to the general public, and produce big profits for early investors. “He preyed upon investors’ sense of patriotism by promising to invest the proceeds of the offering in exclusively American businesses, and help assist in Washington state’s economic recovery,” the SEC said.
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The SEC alleges that Peterson used investors’ money for personal expenses, is continuing to solicit investors and may be preparing to tout the offering through investor seminars and public advertising.
“We’ve brought this court action to stop Peterson’s fraud in its tracks before it picks up more steam,” said Michael Dicke, associate director in the SEC’s San Francisco Regional Office, in a statement. “The JOBS Act is intended to help small businesses raise capital, not to legalize fraud or give unscrupulous entrepreneurs a right to make false claims to fleece investors.”
According to the SEC’s complaint filed in federal court in Spokane, Peterson sold common stock in USA Real Estate Fund from November 2010 to June 2012 to more than 20 investors in Washington and at least five other states.