Washington, D.C., Dec. 30, 2008 (LAWFUEL) – The Securities and Exchange Commission has obtained an emergency court order to halt an alleged Ponzi scheme and affinity fraud that collected more than $23 million from thousands of investors in the Haitian-American community nationwide through a network of purported investment clubs.
The SEC alleges that Creative Capital Consortium LLC and A Creative Capital Concept$, LLC (collectively, Creative Capital) and its principal, George L. Theodule, began conducting the scheme as early as November 2007 by urging investors to form investment clubs to funnel funds to Theodule and Creative Capital. Theodule solicited investors by guaranteeing a 100 percent return on their investment within 90 days based on his claimed successful trading of stocks and options. According to the SEC’s complaint, investors also were promised that Creative Capital’s trading profits were being used to fund new business ventures, including some to benefit the Haitian community in the U.S., Haiti, and Sierra Leone. The SEC alleges that Theodule has lost at least $18 million trading stocks and options just over the last year, and Creative Capital merely repaid earlier investors with monies collected from new investors in typical Ponzi scheme fashion. The SEC also alleges that Theodule has commingled investor funds with his personal funds and misappropriated at least $3.8 million for himself and his family.
“This alleged Ponzi scheme preyed upon unsuspecting members of a close-knit community, attempting to take advantage of the trust they had in each other,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “As always, investors need to be wary of investment opportunities that guarantee results and tout extraordinary returns.”
David Nelson, Director of the SEC’s Miami Regional Office, added, “This case demonstrates that individuals will often rely on a shared affinity to gain investors’ trust. In this case, Theodule allegedly abused that trust to con thousands of investors in the Haitian-American community.”
Judge Donald M. Middlebrooks, U.S. District Judge for the Southern District of Florida, issued the order on December 29 placing Creative Capital under the control of a receiver to safeguard assets, as well as other emergency orders, including temporary restraining orders and asset freezes.
The SEC’s complaint further alleges:
Defendants’ statements of the safety and security of investor deposits are patently false. Theodule directs prospective investors to form investment clubs with the assistance of a purported self-regulatory agency called Smart Investment Management Services, LLC (SIMS). Defendants tout SIMS’ independent verification of their deposits as an added measure of safety and security. In reality, SIMS is a private company run by a former Creative Capital employee and not a regulatory entity.
Defendants’ claim of success trading stocks and options are also false. Of the more than $18 million deposited in brokerage accounts, Theodule has lost approximately 97 percent of those funds trading stocks and options. In fact, Theodule has consistently lost money trading in those accounts since November 2007, and has never generated net trading profits.
Defendants’ claims that Creative Capital’s trading profits were used to fund new business ventures, some of which would benefit the Haitian community in the United States and Haiti, and others in Sierra Leone are false. In reality, there were no trading profits, and most of the funds the defendants disbursed went to pay earlier investors their purported profits, not fund business projects. Moreover, the defendants misappropriated millions of dollars of investor funds.
In addition to the emergency relief obtained, the SEC’s complaint seeks disgorgement of the defendants’ ill-gotten gains, financial penalties, and permanent injunctions barring future violations of the antifraud provisions of the federal securities laws.
The Commission acknowledges the assistance of the State of Florida’s Office of Financial Regulation in connection with this matter.
The SEC’s investigation is continuing.List your legal jobs on the LawFuel Network