Among recent enforcement actions by the Securities and Exchange Commission were charges against perpetrators of fraud involving “charitable gift annuities,” against a Canadian citizen in a microcap fraud case; against a Houston-area businessman working a Ponzi scheme worth more than a million dollars; and against an energy company, its current chief operating officer and its former chief financial officer for accounting fraud.
In addition, the Financial Regulatory Authority (FINRA) barred a former Caldwell broker for churning customers’ accounts.
2 Execs Charged in Fake Annuity Scam
The SEC has announced that it has charged James P. Griffin, the founder and CEO of 54Freedom Inc.; James Wolle, 54Freedom’s chief financial officer and treasurer; and seven other firms with defrauding investors who purchased the companies’ securities and so-called “charitable gift annuities.” Many of the investors were residents of upstate New York.
The U.S. Attorney’s Office for the Northern District of New York announced that Griffin had been arrested on charges of fraud and money laundering related to the annuities.
According to the agency, the scheme brought in at least $8 million from 125 or more investors in shares and promissory notes issued by the companies over more than seven years, starting in 2007.
Griffin and Wolle, both of Cazenovia, New York, repeatedly misled prospective investors regarding the companies’ prospects, making numerous claims with no basis in fact. An exclusive relationship with Lloyd’s of London was one claim; another was that they would publish a soccer book affiliated with the “Chicken Soup for the Soul” series.
Griffin is also alleged to have sold phony “charitable gift annuities” that he falsely claimed were backed by reputable insurance companies, and to have diverted at least $1.2 million of investor funds to pay for corporate and personal expenses, including a boat and trips he and his wife took to Hawaii and New Zealand.
Griffin, Wolle and the companies are charged with violations of the antifraud and registration provisions of the securities laws. In addition, Griffin’s wife, Chary Griffin, is named as a relief defendant for the purpose of recovering allegedly misappropriated investor funds.
Six of the firms charged are based in Cazenovia: 54Freedom Securities Inc., MoneyIns Inc., 54Freedom Foundation Inc., 5 Ledyard Ave. LLC, 5 Ledyard Corp. and IICNet LLC. One firm, 54FreedomTele Inc., is based in Miami.
SEC: Canadian’s Public Tech Company Wasn’t So Public After All
Phillip Thomas Kueber, a Canadian citizen, has been charged by the SEC with conducting a scheme to hide his control and ownership of a microcap company whose price quickly spiked last year. The SEC thwarted his scheme by suspending trading in the stock, Cynk Technology Corp., before Kueber could profit on the gains from the stock’s rise to more than $21 from less than 10 cents per share.
According to the agency, Kueber masterminded a phony and deceptive registration statement filed by Cynk. He enlisted a small group of straw shareholders and fake CEOs to hide his control of supposedly nonrestricted shares in Cynk stock. The straw shareholders — mainly Kuber’s family members and associates in British Columbia and California — never received the shares they “purchased.”
Instead, Kueber managed to transfer the shares to brokerage accounts and offshore shell companies he secretly controlled, while misleading broker-dealers about his ownership of the shares to create the false appearance of a company with publicly held shares. The scheme didn’t pay off, though. Kueber was unable to cash in on selling his Cynk shares; the SEC suspended trading in Cynk on July 11, 2014 amid suspicious activity surrounding the company’s stock. Once trading resumed, the share price fell, closing at 60 cents per share on July 28, 2014.
The SEC seeks to impose a civil monetary penalty, to bar Kueber from serving as a public company officer or director or participating in a penny-stock offer, and to be subject to a court-ordered injunction against future antifraud violations. Its investigation is continuing.
Driver Safety-Related Ponzi Scheme Busted
Frederick Alan Voight of Richmond, Texas was charged by the SEC with operating a $114 million Ponzi scheme that defrauded more than 300 investors, some of whom were told that their money would fund technology to prevent accidents caused by drowsy driving.
Voight lured investors in to multiple offerings of promissory notes issued by two partnerships he owns, F.A. Voight & Associates LP and DayStar Funding LP. Although his latest offering promised investors returns as high as 42% annually from loans to small public companies, most of the money went instead to pay earlier investors. However, approximately $22 million of the money he got from investors is still unaccounted for.