Washington, D.C., May 2, 2008 (Lawfuel) – The Securities and Exchange Commission has obtained a court order halting a $25 million Ponzi-like scheme that particularly targeted Christian communities nationwide.
The SEC charged Laguna Hills, Calif.-based Safevest LLC and its two principals for allegedly misappropriating investor funds in the multi-level marketing scheme that included investors recruited as “consultants” who often solicited other investors, such as friends they met in church or others who explicitly identified themselves as Christians. The SEC alleged that Jon G. Ervin, managing director of Safevest, and John V. Slye, its CEO and purportedly an ordained minister and missionary, misrepresented that investor funds would be pooled and invested in commodity futures trading, would generate daily profits of 1.5 to nearly 2 percent, and investors could receive their money back within 72 hours of requesting it.
In reality, according to the SEC’s complaint, no investor money was invested in futures trading, and requests by investors for withdrawal of their funds have been honored only partially or not at all. Ervin, Slye, and their family members have instead used investor funds for personal purchases from airlines, a car dealership, restaurants, and retail stores.
“This emergency action shows that the Commission will do everything in its power to stop wrongdoers in their tracks and protect investors from fraudsters who, as alleged here, seek to exploit any particular religious or ethnic group. Affinity frauds are particularly reprehensible because they prey on the trust between individuals in a group. In this case, Slye held himself out as an ordained minister, taking advantage of church members’ confidence in his role as a trustworthy leader,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement.
“As alleged in our complaint, investors were lured into believing that they were investing in a profitable futures trading program that never existed,” said Rosalind R. Tyson, Acting Regional Director of the SEC’s Los Angeles Regional Office. “This case demonstrates that the Commission will work closely with other federal and state agencies to prosecute the wrongdoers and protect current and future investors from further harm.”
The Honorable James V. Selna, U.S. District Court Judge for the Central District of California, issued an order on May 1 freezing assets and appointing a temporary receiver over Safevest and its affiliates. The SEC’s complaint, filed in federal court in Santa Ana, Calif., alleges that since at least May 2007, the defendants have raised and misappropriated at least $25 million from more than 500 investors nationwide. The complaint further alleges that, undisclosed to investors, the defendants paid more than $18 million to investors in Ponzi-like fashion.
In its lawsuit, the SEC obtained an order (1) freezing the assets of Ervin and Slye; (2) freezing the assets of, and appointing a temporary receiver over, Safevest and its affiliates; (3) preventing the destruction of documents; and (4) temporarily enjoining Safevest, Ervin, and Slye from future violations of the antifraud provisions of the federal securities laws. The Commission also seeks preliminary and permanent injunctions, disgorgement, and civil penalties against all defendants. A hearing on whether a preliminary injunction should be issued against the defendants and whether a permanent receiver should be appointed is scheduled for May 12, 2008 at 1:30 p.m.
The Commodity Futures Trading Commission also filed an emergency action yesterday against Safevest, Ervin, and Slye alleging violations of the antifraud and registration provisions of the Commodity Exchange Act, and the California Department of Corporations today issued a desist and refrain order to Safevest and Ervin. The U.S. Attorney’s Office for the Central District of California also filed a criminal complaint against Ervin yesterday, and the Federal Bureau of Investigation arrested him today.
The SEC acknowledges the assistance of the Commodity Futures Trading Commission, the U.S. Attorney’s Office for the Central District of California, the Federal Bureau of Investigation, and the California Department of Corporations.
The SEC’s “Affinity Fraud” Investor Alert provides tips on how to avoid being a victim in an affinity fraud: http://www.sec.gov/investor/pubs/affinity.htm. In addition, the SEC reminds all investors to exercise healthy skepticism and thoroughly investigate promises of returns that seem to be too good to be true. Safevest’s promised returns of 1.5 to 2 percent daily would amount to promised returns of more than 700 percent annually, which in itself is a red flag to investors.List your legal jobs on the LawFuel Network