A California financial and insurance services company and its CEO, who were tied to the Woodbridge Group of Companies Ponzi scheme, agreed to pay a total of about $301,800 in disgorgement, interest and a civil penalty to settle a suit that the Securities and Exchange Commission filed against it, the SEC said Wednesday.
In a complaint filed in the U.S. District Court for the Central District of California, the SEC said Steven M. Sexton and his firm, Sexton Advisory Group, illegally sold Woodbridge securities as an unregistered broker.
The SEC alleged that from May 2016 to November 2017, Sexton and Sexton Advisory sold about $4.6 million of Woodbridge’s securities to about 63 investors, earning $244,654 in commissions and other compensation from Woodbridge.
Neither Sexton nor Sexton Advisory were registered as broker-dealers and the Woodbridge securities were not sold pursuant to SEC registration or an exemption from registration, according to the complaint. However, through their selling activity, Sexton and Sexton Advisory acted as brokers, the SEC said.
As part of Woodbridge’s nationwide offering, Sexton and his firm offered two different Woodbridge securities to their insurance agency clients: a 12-month term promissory note and/or a nine-month term promissory note, according to the SEC.
The returns on those securities were supposedly based on the revenues Woodbridge received from issuing loans to third-party commercial property owners, the complaint said. “In reality and unbeknownst to Defendants, however, the Borrowers were hundreds of shell companies wholly-owned and controlled by Woodbridge’s CEO and president, which never made any payments to Woodbridge,” the complaint alleged.
The returns investors received on their investments were instead paid using funds raised from other investors, the SEC said.
Sexton and Sexton Advisory violated the securities registration provisions of the Securities Act of 1933 and the broker registration provisions of the Securities and Exchange Act of 1934, the SEC said.