Washington, D.C., May 7, 2008 (Lawfuel) – The Securities and Exchange Commission has obtained a court order to stop a $27 million Ponzi scheme involving investors in the United States, Canada, and other countries.
The SEC charged Las Vegas-based Gold-Quest International and its three principals for the alleged misuse of investor funds in a scheme that promised incentives to investors who recruited “friends and family” into the system. The SEC alleged that Gold-Quest and its owners misrepresented that investor funds would be pooled and invested in foreign currency exchange trading and would generate annual profits of 87.5 percent. No investor money was actually invested in foreign currency exchange trading.
According to the SEC’s complaint, Gold-Quest’s owners David M. Greene (who refers to himself as Lord David Greene), John Jenkins, and Michael McGee instead used investor funds to compensate investors who brought in new investors. Up to 88 percent of each investor’s principal was paid to the chain of promoters responsible for bringing the investor into the Gold-Quest program. Most of the remaining funds were used by Greene, Jenkins, and McGee for personal expenses.
“This emergency action shows that the Commission, together with foreign securities regulators, will move swiftly to stop ongoing frauds and protect investors, both in the United States and internationally. In the type of multi-level marketing scheme alleged in our complaint, the perpetrators enlist defrauded investors as their sales force to solicit new investors from among their family and friends. By preying on the mutual trust in such relationships, the alleged perpetrators in this case were able to easily expand their network of victims, even across international borders,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement.
“As alleged in our complaint, investors were enticed into believing that they were investing in a profitable foreign currency exchange 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 international and state agencies to prosecute wrongdoers and protect current and future investors from further harm.”
The Honorable Lloyd D. George, U.S. District Court Judge for the District of Nevada, issued an order freezing assets and appointing a temporary receiver over Gold-Quest and its affiliates. The SEC’s complaint, filed in federal court in Las Vegas, alleges that since at least mid-2006, the defendants have raised and misappropriated more than $27.9 million from more than 2,100 investors in the United States and Canada. The complaint further alleges that, undisclosed to investors, the defendants paid more than $19.1 million as returns to other investors in this Ponzi-like scheme. According to the SEC’s complaint, Gold-Quest and its owners claim they are not subject to the jurisdiction of the United States or Canada because they are members of the Little Shell Nation Indian tribe, purportedly headquartered in North Dakota. However, the Little Shell Nation is not in fact recognized as a sovereign tribe or nation.
In its lawsuit, the SEC obtained an order (1) freezing the assets of Greene, Jenkins, and McGee; (2) freezing and repatriating the assets of, and appointing a temporary receiver over, Gold-Quest and its affiliates; (3) preventing the destruction of documents; and (4) temporarily enjoining Gold-Quest, Greene, Jenkins, and McGee 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 14, 2008 at 2:00 p.m.
The SEC acknowledges the assistance of the Alberta Securities Commission, the British Columbia Securities Commission, the Manitoba Securities Commission, the Ontario Securities Commission, and the Nevada Secretary of State, Securities Division.List your legal jobs on the LawFuel Network