SEC Files Suit Against Profitable Sunrise, Calls It "Fraud and Pyramid Scheme"

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:

1. The Starter Plan;
2. The Regular Plan;
3. The Advanced Plan;
4. The Private Plan; and 
5. 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.

SEC: Secretive 'Trust' With World War II Ties That Promised 38% Annual Returns Was $15 Million Ponzi Scheme

The Securities and Exchange Commission ("SEC") instituted a civil enforcement action against a Florida man and a California woman, alleging that the investment opportunity promising 38% annual returns and requiring strict secrecy was, in reality, a Ponzi scheme that raised more than $15 million from unsuspecting investors.  Billy W. McClintock, 70, and Diane Alexander, also 70, were charged with multiple violations of federal securities laws in connection with the alleged scheme, which promised lucrative gains through a highly-secretive entity known as the "Trust".  The SEC is seeking injunctive relief, an asset freeze, disgorgement of all ill-gotten gains, and civil monetary penalties.

According to the SEC, McClintock was a resident of Bradenton, Florida, and had previously served time in prison due to a cocaine trafficking conviction.  McClintock and Alexander apparently shared a long-time friendship, and sometime before 2002, McClintock confided to Alexander that he was associated with a secretive investment club known as the "Trust".  Apparently, while on a trip to London, McClintock had happened upon a man named "John" who was a member of the Trust and disclosed to McClintock that he could lend money to the Trust and receive a 38% annual return.  The "Trust" was allegedly formed after World War II by several wealthy European families, with offices in Luxembourg and Zurich, and had the power to create money "through fractional banking and the sale of banking debentures"

The "Trust" was shrouded by heavy secrecy, with McClintock being told that the communication of any details about the trust to any third person, such as an attorney, certified financial accountant, or financial planner, would result in that person's permanent ban from participating in the Trust.  After hearing McClintock's story, Alexander accepted McClintock's offer to serve as United States Regional Director for the Trust, in addition to three other unnamed Regional Directors.  Along with McClintock - the 'United States National Director' - the two relayed the same story to potential investors, along with the promise of steady annual returns of 38%.  The two also appealed to investors' religious beliefs, telling them to "put your money in the Trust and your trust in God.” In total, approximately 220 investors contributed over $15 million to the "Trust".

However, contrary to their representations, there is no evidence that any secretive Trust ever existed, and neither Alexander nor McClintock ever sent any investor funds to any Trust.  Rather, according to the SEC, investor funds were simply pooled together in classic Ponzi scheme fashion, and the regular interest payments made to investors were in fact comprised of these commingled funds.  Additionally, investors were not told that, in return for referring investors to the "Trust", Alexander received a 'management' fee of 5%, which she also received for every investor that 'rolled over' their principal investment upon expiration. As the SEC stated, 

the Trust is a Ponzi scheme in which new investor funds, not Trust profits, pay the purported fees  and interest owed to earlier investors. 

Ironically, Alexander sought to convince investors to disregard the old agage that  'If it sounds too good to be true, it probably is,' claiming that it was simply 'a lie that came from the pit of hell.' 

A copy of the SEC complaint is here.

Hawaii Woman "Bestowed by Jesus to Trade Commodities" Sentenced to Prison for $1 Million Ponzi Scheme

A Hawaii woman who told investors that she had been "bestowed by Jesus Christ to with the ability to trade commodities", but instead operated a Ponzi scheme, was sentenced to federal prison on Friday.  Kapua Keolanui, 36, was sentenced to thirty-three months in federal prison by United States District Judge David Ezra, who called her behavior callous and also ordered her to pay nearly $900,000 in restitution to her victims.  Keolanui, who had previously pled guilty to one count of wire fraud, was sentenced to the maximum sentence under federal sentencing guidelines.  Wire fraud carries a maximum sentence of up to twenty years in federal prison.  

The scheme derives out of Keolanui's association with Rachelle and Perry Griggs, who were recently sentenced to prison for masterminding the scheme.  Previous Ponzitracker coverage of the Griggs is here.  Perry Griggs became associated with Keolanui's husband when both were incarcerated; ironically, Perry Griggs was serving time for his role in a previous Ponzi scheme.  Through his relationship with Keolanui's husband, Perry Griggs convinced Keolanui to form Paradise Trading, LLC with Rachelle Griggs in late 2006.  Keolanui then solicited friends and family, telling them that she had been given the gift of finding money by Jesus Christ.  In total, six different individuals gave Keolanui over $1 million to invest.  Instead of using the money to invest, Keolanui funnelled some of the money to Aloha Trading, which was Perry Grigg's operation that he was running from behind prison walls.  When Grigg's scheme was uncovered, nearly all of the victims' money had disappeared.  

Keolanui was scheduled to report to prison on November 28, 2011.  She was also ordered to three years of probation upon release from prison.  

A copy of the Complaint filed against Griggs and Aloha Trading by the U.S. Commodity Futures Trading Commission is here.