Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Regulation and Compliance > Federal Regulation > SEC

Alleged Ski Resort Schemer Agrees to Repay Investors: Enforcement

Your article was successfully shared with the contacts you provided.

The Miami-based businessman behind an alleged scheme involving investments in a Vermont-based ski resort has agreed to pay back more than $81 million of investor money that he used illegally, according to the Securities and Exchange Commission.

According to an SEC complaint filed in 2016 in federal court in Miami, Ariel Quiros allegedly misused more than $50 million in investor funds to purchase a different ski resort and to fund personal expenses such as income taxes and two luxury New York City condominium purchases.

Investors were told their money would specifically be used for construction projects at the Jay Peak Resort and a nearby proposed biomedical research facility.

Companies owned by Quiros also allegedly failed to contribute approximately $30 million in investor funds toward Jay Peak construction, with two projects going uncompleted. This jeopardized investors’ investments as well as their participation in the EB-5 Immigrant Investor Program under which Quiros and his businesses solicited the money.

In a settlement subject to court approval, Quiros agreed to be held liable for more than $81 million in disgorgement of ill-gotten gains plus a $1 million penalty, and he must forfeit approximately $417,000 in cash that was frozen after the SEC filed the case. 

Quiros also agreed to surrender ownership of the two condos and ski resort he purchased with investor funds and give up his stake in more than a dozen other properties, including the Jay Peak Resort. Under the proposed settlement, the properties would be turned over to the court-appointed receiver in the case for the purpose of selling them for the benefit of defrauded investors.

The SEC also announced that a business associate of Quiros, William Stenger of Newport, Vermont, agreed to settle the charges against him in the SEC’s complaint. While Stenger was not alleged to have personally profited from the fraud, he agreed to pay a $75,000 penalty and be barred along with Quiros from participating in any future EB-5 offerings. 

Quiros and Stenger agreed to their settlements without admitting or denying the allegations in the SEC’s complaint.

2 Advisors Charged With Stealing $450,000 From Elderly Client

The SEC charged two Boston-area investment advisors with defrauding multiple clients by stealing nearly $500,000 of client assets, along with other breaches of their fiduciary duty.

According to the complaint, James Polese and Cornelius Peterson — while employed as investment advisors at a large financial institution — engaged in various schemes beginning in 2014 to defraud their clients, including stealing nearly $450,000 from one elderly client.

In March 2016, Polese and Peterson fraudulently misappropriated $350,000 of their client’s money, using $100,000 of those funds to make investments in their own names, and directing the remaining $250,000 to Polese’s personal bank account.

Then, from March through May 2017, Polese made numerous unauthorized withdrawals from the same client’s account totaling approximately $93,000 to pay Polese’s credit card and college tuition expenses for his children.

In addition to stealing client funds, the complaint alleges that Polese and Peterson breached their fiduciary duty to their clients when they secretly put client funds at risk by using a client’s assets as collateral to secure loan financing for a private entity in which Polese and Peterson were investors. The pair also invested client funds into an investment in which they held a financial interest, without informing the client or disclosing their conflict of interest.

According to the SEC, Polese again violated his fiduciary duties when he obtained a loan from a client on unfavorable terms to the client and when he charged a client advisory fees 50% higher than the rate he repeatedly promised to charge her.

The complaint seeks permanent injunctions, civil penalties, and disgorgement plus prejudgment interest against Polese and Peterson.

In a parallel action, the U.S. Attorney’s Office for the District of Massachusetts announced criminal charges against Polese and Peterson.

SEC Freezes Assets Behind Alleged Insider Trading

The SEC entered an emergency court order freezing assets related to alleged insider trading that yielded approximately $5 million in profits in connection with an acquisition announcement by biopharmaceutical companies Bioverativ Inc. and Sanofi S.A.

The SEC’s complaint identifies a series of suspicious transactions surrounding the announcement of a definitive agreement under which Sanofi will acquire all of Bioverativ’s outstanding shares for $105 per share in cash, representing an equity value of approximately $11.6 billion and a 63% premium over Bioverativ’s pre-announcement closing price. 

The traders, who are currently unknown, allegedly used foreign brokerage accounts in Switzerland to purchase out-of-the-money call options through a U.S.-based brokerage firm and on U.S.-based exchanges in the days leading up to the public announcement of the acquisition. 

The court’s order freezes the proceeds related to the foreign accounts’ trading.

The emergency court order obtained by the SEC requires the traders to repatriate any funds or assets located outside the U.S. that were obtained from the alleged insider trading. The traders also are prohibited from destroying any evidence.  

The SEC is seeking a final judgment ordering the traders to disgorge their allegedly ill-gotten gains plus interest, imposing civil penalties, and permanently enjoining them from future violations.

Court Enters Judgment In Penny Stock Manipulation Case

The U.S. District Court for the District of Delaware entered a consent judgment in a penny stock manipulation case brought by the SEC against Richard Bailey, a former officer of GH3 International Inc.

The SEC’s complaint alleges that Bailey participated in a pump-and-dump scheme involving GH3’s common stock, generating more than $700,000 of illicit proceeds for Bailey and seven other named defendants involved in the fraudulent scheme.

Without admitting or denying the allegations, Bailey consented to the entry of a judgment that bars him from participating in any offering of a penny stock and bars him from serving as an officer or a director of a public company.

The judgment provides that upon subsequent motion by the SEC the Court will determine issues relating to monetary relief.

— Related on ThinkAdvisor:


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.