The Securities and Exchange Commission today announced the filing of a settled civil injunctive action in the United States District Court for the Eastern District of Virginia against Ralph Gregory Gibbs, a resident of New Haven, West Virginia, who operated an offering fraud and “Ponzi” scheme. The Complaint alleges that since at least April 2005 through February 2007, Gibbs, doing business as Golden Summit Group, raised approximately $21 million from at least 150 investors in at least 25 states through the offer and sale of securities. Based on Gibbs’ promises that they would receive large returns on their investments and guaranteed returns of their principal, a significant number of the investors, many of whom were elderly, retired or otherwise living on limited incomes, liquidated their retirement savings or obtained home equity loans to invest the money with Gibbs.
Simultaneous with the filing of the Commission’s action, the U.S Attorney’s Office for the Eastern District of Virginia, announced that Gibbs pleaded guilty to criminal charges related to this conduct.
The Commission’s Complaint further alleges that in exchange for their investments in Golden Summit Group, Gibbs promised to pay investors interest of 3-5% monthly (up to 60% annually) and guaranteed that investors would not lose their principal. Gibbs further represented that, due to his unique trading expertise, he could generate these exceptional returns by pooling investor funds and subsequently using those funds to trade currencies on the Foreign Exchange Market (Forex). Gibbs, however, from the outset, operated a Ponzi scheme, which effectively created the illusion for investors that they were investing in a profitable trading program rather than a fraudulent scheme. As part of this scheme, Gibbs made numerous material misrepresentations and omissions to investors concerning, among other things, the nature of the purported investment, the risks of investing, the use of the investors’ proceeds, the source of the investors’ returns, and his current and previous trading performance.
The Commission’s Complaint also alleges that of the approximately $21 million he raised from investors, Gibbs deposited only approximately $8.1 million into his Forex trading account, where he subsequently lost over $6.3 million of investor funds through his trading of currencies. To conceal these losses, Gibbs used the cash flow generated from new investments, approximately $7.5 million, to pay existing investors the returns that he promised them. He also misappropriated over $2.9 million of investor money to pay for his own personal expenses, including $1.14 million for a new, custom-built home. As a result of this conduct, the Complaint alleges that Gibbs violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 (Securities Act), and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder.
Simultaneous with the filing of the Complaint, and without admitting or denying the Commission’s allegations, Gibbs consented to the entry of a final judgment, subject to the Court’s approval: permanently enjoining him from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; ordering Gibbs to pay disgorgement, plus prejudgment interest thereon, totaling $21,421,418; but based upon Gibbs’ representations in his sworn statement of financial condition, waiving payment of all but the monies and assets Gibbs placed into a constructive trust for investors, namely $4,142,493 in cash, plus accumulated interest, two real estate properties and certain personal property; not imposing a civil penalty based upon his sworn representations in his statement of financial condition; and ordering the appointment of a receiver to assume control of the constructive trust for liquidation and ultimate distribution to the injured investors.
The Commission acknowledges the assistance of the U.S. Attorney’s Office for the Eastern District of Virginia, the Federal Bureau of Investigation, the U.S. Postal Inspection Service, the West Virginia State Auditor’s Office, and the U.S. Commodity Futures Trading Commission.
The Commission has provided information warning investors about High Yield and other offering frauds. See: http://www.sec.gov/investor/pubs/investorfraud.htm.