The Securities and Exchange Commission filed charges against 26 defendants for their alleged involvement in a $428 million securities fraud scheme targeting thousands of senior citizens and other investors in the United States.
According to the SEC action, filed in Chicago’s federal district court, the defendants participated in selling “Universal Lease” securities that were structured as timeshares in hotels located in Cancun, Mexico. A pre-arranged rental agreement promising investors a high, fixed return rate was also included. The fraudulent scheme fell apart and investors have reportedly lost more than $300 million from the scam.
The SEC says that Michael E. Kelly and others scammed thousands of U.S. investors by persuading them to spend their retirement savings on the purchase of Universal Leases. Kelly and his team falsely promised returns that were secure and guaranteed. The SEC claims that Kelly and his group raised at least $428 million from investors, with IRA accounts as the source of over $136 million.
The SEC also claims that Kelly and a number of other people ran the scam from Cancun through several foreign entities in Panama and Mexico. Supposed “rental income” payments that were actually new investors funds were issued to investors.
The SEC also alleges that a number of unregistered representatives in the US collected undisclosed commissions of over $72 million. The fact that more than $72 million in investor funds were used to pay commissions of up to 27% to brokers was also allegedly not mentioned to investors.
SEC Division of Enforcement Director Linda Chatman Thomsen said that although Kelly and his group promised safe investments, the scheme was run in a manner that placed investors at great risk because it was going to inevitably fall apart.
Kelly and the other defendants are charged with violation of the federal securities laws’ antifraud and registration provisions. The SEC is asking for civil penalties, disgorgement of ill-gotten gains, and permanent injunctions.
The SEC’s action is one of more than 40 enforcement actions since 2005 that the SEC has brought as part of its crackdown on investment scams targeting the elderly. The SEC thinks that Kelly and his group may have hoped to avoid detection by operating their securities fraud scam from abroad. It expressed its ongoing commitment to holding anyone trying to scam elderly investors accountable.
If you are a senior investor that has lost money because you were the victim of investment fraud, you should contact Shepherd Smith and Edwards right away. We have dedicated our legal practice to helping investors recover their losses.
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Related Web Resources:
SEC Charges 26 Defendants in $428 Million Securities Fraud That Targeted Senior Citizens and Retirement Savings, SEC.gov, September 5, 2007
SEC charges 26 with fraud preying on elderly, Reuters.com, September 5, 2007