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The Securities and Exchange Commission ("SEC") charged a British company doing business as Profitable Sunrise with multiple violations of federal securities law, alleging it was a fraud and pyramid scheme that took in tens of millions of dollars from tens of thousands of investors. The complaint, filed in federal court in the Northern District of Georgia, was accompanied by an emergency request for (and subsequent order granting) an asset freeze to preserve investor funds in the interim. The SEC named Inter Reef Ltd., which does business as Profitable Sunrise, as the sole defendant, and also named several entities as relief defendants which received funds from individuals wishing to invest in Profitable Sunrise. The SEC is seeking injunctive relief, an order freezing bank accounts in the Czech Republic and Hungary, an order requiring accounting of funds received from investors, and civil monetary penalties.

Beginning no later than December 2012, Profitable Sunrise offered investors the opportunity to profit "with every sunrise" by promising astronomical returns to investors. The company heavily emphasized its religious ties, including multiple Bible quotes on its website and claiming to donate a large portion of its profits to charity. Investors were told that they could receive daily returns ranging from 1.6% to 2.7% as a result of Profitable Sunrise's lucrative business making loans to other businesses at high rates. The company represented that an investment had very little risk, as each loan was insured against default.

Investors were given the option to choose one of five investment plans:

The Starter Plan;
The Regular Plan;
The Advanced Plan;
The Private Plan; and
The Long Haul Plan.

The first three plans required minimum investments of $10, $500, and $2,500, respectively, and promised daily interest rates of 1.6%, 1.8%, and 2%, respectively. Each of those plans carried a term of 180 business days, with balances compounding daily. The fourth plan, the Private Plan, was available only to groups. The last plan, the Long Haul Plan, had a 240-day duration, and promised a daily 2.7% interest rate with a minimum $500 investment.

Once an individual became an investor, he or she was then allowed to recruit additional investors with the understanding that they would be entitled to 5% of all investments, and subsequent earnings, they brought in. This resulted in an onslaught of solicitations, which only assisted in spreading the word about Profitable Sunrise. As one video on Youtube noted, a $5,000 investment would yield nearly $186,000 in less than six months - a return of nearly 4,000%.

However, according to the SEC, Profitable Sunrise did not make lucrative loans with other businesses, nor did it insure its loans with a leading investment bank. Rather, it operated a massive fraudulent fraud and pyramid scheme, using the promise of astronomical returns and referral incentives to take in what is likely to be tens or even hundreds of millions of dollars from investors. Indeed, the SEC alleges that at least one promoter claims to have raised tens of millions of dollars from investors. The SEC estimates that tens of thousands of investors were likely duped in the scheme.

The SEC named several Czech Republic companies as relief defendants, which were used to collect money from investors. These companies are Melland Company S.R.O., Solutions Company S.R.O., Color Shock S.R.O., and Fortuna K.S.R.O. According to the SEC, millions of dollars in investor funds flowed between these companies.

The move comes as multiple states, including South Dakota, Nevada, Missouri, and North Carolina, have recently moved for cease-and-desit orders against Profitable Sunrise.

A hearing on the SEC's preliminary injunction is scheduled for April 15, 2013.

A copy of the Complaint is here.

h/t to ASDUpdates.