Handcuffed man holding cash. (Photo: Thinkstock)

The Securities and Exchange Commission filed fraud charges against investment advisor Ruless Pierre of Nanuet, New York, and his R. Pierre Consulting Group for operating a multimillion-dollar investment club that the SEC said was actually a Ponzi scheme targeting members of the local Haitian community.

In or about 2016, Pierre formed an informal investment club in which he, his brothers, sister and a few friends each contributed about $2,500 in an effort to generate passive income, according to the SEC’s complaint, filed Wednesday in the U.S. District Court for the Southern District of New York.

Initially, club members suggested specific stocks they had researched and the group decided which stocks to buy, the complaint said. Starting in or about 2017, Pierre formalized the investment club, called it Amongst Friends, and expanded it beyond the initial family and friends, according to the SEC, which noted that, by that point, members were relying “solely on” Pierre’s investment choices.

Pierre started issuing notes to investors using the Amongst Friends name and, although terms of those notes varied, they were similar in a few key aspects, according to the SEC.

First the notes each contained “exceptionally high rates of return, from 20% interest every 60 days to as high as 40% interest every 60 days,” the complaint said. The notes also lacked maturity dates, instead indicating they were to be repaid “upon dissolution” or within 30 days of the investor’s “request to exit the group,” and they all also stated the purpose of the investment group was to invest the assets of the group in stocks, other securities, digital currencies, and commercial and residential rental property, according to the complaint.

From at least March 2017, Pierre allegedly raised more than $2 million from at least 100 investors, mainly Haitian New Yorkers, who bought the high-yield promissory notes through Amongst Friends, the SEC said. Despite Pierre’s promise of unrealistically high rates of return, the complaint alleged he incurred heavy losses trading securities and hid them by using new investor funds to pay older investors and issuing false account statements showing investment gains.

Pierre allegedly further financed the fraud by using money he embezzled from a former employer to make interest payments to investors, the SEC said. Its complaint also claimed Pierre fraudulently raised at least $375,000 from more than 15 investors related to a scheme involving the sale of partnership interests in a fast food chain.

Pierre’s Amongst Friends investment opportunity was “built on a foundation of lies and deceit,” according to Marc P. Berger, director of the SEC’s New York Regional Office. “Investors should be wary of investments promising rates of return that seem too good to be true, and are encouraged to ask questions and check on their investment professional’s background at http://www.Investor.gov,” he said in a statement.

— Check out Woodbridge CEO Gets 25-Year Sentence for Fraud on ThinkAdvisor.