Washington, D.C., May 14, 2008 (Lawfuel) – The Securities and Exchange Commission today filed securities fraud charges against the promoters of an $18 million real estate investment scheme targeting the African-American community in the Los Angeles area and other locations in Nevada and Georgia.
The SEC’s complaint, filed in U.S. District Court in Los Angeles, charges Jeanetta M. Standefor, a 40-year-old resident of Altadena, Calif., and her Pasadena, Calif.-based company Accelerated Funding Group (AFG) for operating a fraudulent “foreclosure reinstatement” scheme that attracted more than 600 investors between 2005 and 2007. The scheme purported to use investors’ funds to cure defaults on distressed properties owned by others. The SEC alleges that while soliciting investor money and promising returns of up to 50 percent within 30 to 45 days, Standefor and AFG were instead operating a Ponzi-like scheme that used money from new investors to pay previous investors. Standefor also used more than $1.9 million of investor funds for personal expenses such as her lavish wedding and honeymoon, cars, jewelry, tickets to entertainment events, and home renovations. Standefor and AFG also misused investor funds to pay $121,000 in “consulting fees” to Standefor’s husband, Darrell R. Dansby.
In a related action today, the U.S. Attorney’s Office for the Central District of California announced that Standefor was arrested by special agents with the Federal Bureau of Investigation on criminal charges related to the AFG offering. Yesterday, a federal grand jury in Los Angeles returned an 11-count indictment charging Standefor with wire fraud, mail fraud, and money laundering. She is expected to make her initial court appearance this afternoon in U.S. District Court in Los Angeles. If convicted of the criminal charges in the indictment, Standefor faces a statutory maximum sentence of 180 years in federal prison.
“Today’s action demonstrates that the SEC maintains its vigilant effort to fight affinity frauds,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “As alleged in our complaint, this case provides an egregious example of someone exploiting the trust of members of her own community.”
Rosalind R. Tyson, Acting Director of the SEC’s Los Angeles Regional Office, added, “As our complaint alleges, investors were lured into believing they were investing in notes on specific distressed properties, under a deal with homeowners that never existed. This case illustrates the SEC’s commitment to work with other federal and state agencies to bring wrongdoers to justice.”
United States Attorney Thomas P. O’Brien said, “Ms. Standefor unscrupulously tried to benefit from the pain felt by those affected by the downturn in the housing market. This case once again reminds us that promises of huge returns from investments should be thoroughly investigated by those considering making an investment.”
Affinity frauds prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups. The fraudsters frequently are – or pretend to be – members of the group themselves.
According to the SEC’s complaint, Standefor and AFG solicited investors in the African-American community through a now-defunct Web site, word of mouth, and testimonials by other seemingly successful African-American investors. Standefor claimed investor funds would be used to cure defaults on distressed properties. AFG offering materials touted the foreclosure reinstatement program as “virtually risk free” and promised investors that their principal would be safely returned within 72 hours at their request. However, the SEC alleges that Standefor and AFG did not use investor funds to cure defaults on any residential properties, and investors’ requests for returns of their investments have been ignored.
The SEC’s complaint charges Standefor and AFG with violating the antifraud and registration provisions of the federal securities laws, and seeks permanent injunctions, disgorgement of ill-gotten gains, and civil penalties. The complaint also names Dansby as a relief defendant, alleging he received ill-gotten gains from Standefor’s and AFG’s fraudulent conduct.
The California Department of Corporations today also issued a desist-and-refrain order to Standefor and AFG.
The SEC continues to remind investors to exercise healthy skepticism and thoroughly investigate any promises of unusually high returns that seem to be too good to be true. The SEC’s “Affinity Fraud” Investor Alert provides investors with tips about how to avoid being a victim of affinity fraud: http://www.sec.gov/investor/pubs/affinity.htm.