Washington, D.C., June 24, 2009 – The Securities and Exchange Commission today charged a money manager who lives in Wayland, Mass., for conducting a multi-million dollar Ponzi scheme in which he promised investors lofty returns as high as 20 percent but instead often stole their money for his personal use.
The SEC alleges that Michael C. Regan and his firm, Regan & Company, fraudulently obtained at least $15.9 million from dozens of investors nationwide by selling securities in his now defunct River Stream Fund. Regan provided fake account statements and tax forms to investors showing artificially inflated account balances and concealing that he did no securities trading at all for several years and suffered substantial losses on investments that he did make. Regan falsely claimed that he earned an MBA from a major New York university and promoted a phony track record of successful securities trading and investment expertise. Regan is not registered as an investment adviser with the SEC or any other securities regulator.
“Regan lured investors, including family and friends, by touting his investment prowess,” said James Clarkson, Acting Director of the SEC’s New York Regional Office. “He routinely fabricated investment returns to make it appear that he was a successful money manager when in fact he was stealing investor money to pay his own expenses.”
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, alleges that Regan misrepresented to investors that because of his trading expertise and successful investment track record, they could expect annual returns averaging 20 percent with minimal risk to their principal. He promised investors that their money would be pooled into a “fund” that he would invest on their behalf in securities using a conservative, low-risk trading strategy that he claimed was based upon “short-term price trends.”
The SEC alleges that Regan actually used less than half of the funds entrusted to him for trading purposes. Instead of protecting the investors’ principal and delivering the promised returns, Regan misappropriated millions of dollars in investor funds to satisfy withdrawal requests from some investors. He used at least $2.4 million for his personal expenses, including support payments to various family members.
The SEC’s complaint charges Regan and Regan & Co. with violating Section 17(a) of the Securities Act of 1933, Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, and Sections 206(1), 206(2), 206(4) and Rule 206(4)-8 of the Investment Advisers Act of 1940. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and financial penalties against both Regan and Regan & Co.
Separately, the U.S. Attorney’s Office for the Eastern District of New York (USAO) today announced criminal charges against Regan for the same misconduct alleged in the SEC’s complaint.
Regan and Regan & Co. agreed to settle the SEC’s claims against them and consented to the entry of a judgment, subject to approval by the court, that enjoins them from violating or aiding or abetting future violations of the above provisions of the securities laws, orders them jointly and severally liable for more than $8.7 million in disgorgement and prejudgment interest (which will be deemed satisfied if a restitution order is entered in the parallel criminal case), and defers determination of financial penalties to a later date.
The Commission acknowledges the assistance and cooperation of the USAO and the New York Office of the United States Postal Service in this matter.