SEC halts $345M Ponzi-like scheme

The Securities and Exchange Commission announced Wednesday it had obtained a court order to stop an ongoing scheme to raise more than $345 million from more than 230 investors in the U.S. The SEC also obtained an emergency asset freeze and appointed a receiver in its efforts to halt the Ponzi-like scheme.

Kevin B. Merrill, Jay B. Ledford and Cameron Jezierski enticed investors to the scheme by promising significant profits from the purchase and resale of consumer debt portfolios, according to the SEC complaint, unsealed Tuesday. The defendants were in reality using fabricated documents and forged signatures to attract investors and commit fraud, according to the SEC, using the funds to make payments to earlier investors instead of directing funds to the promised servicing of debt portfolios.

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Joe Ratterman of Bats Global Markets Inc., Nasdaq OMX Group Inc arrive for a meeting at the Securities and Exchange Commission in Washington, D.C., U.S., on Monday, May 10, 2010. The chief executive officers of the biggest U.S. stock markets were called to a meeting at the U.S.Securities and Exchange to discuss last week’s selloff in equities, according to four people familiar with the situation. Photographer: Joshua Roberts/Bloomberg

The complaint also alleges that Merrill and Ledford stole at least $85 million of investor funds to finance extravagant lifestyles, spending “$10.2 million on at least 25 high-end cars, $330,000 for a seven-carat diamond ring, $168,000 for a 23-carat diamond bracelet, millions of dollars on luxury homes, and $100,000 to a private fitness club.”

Additionally, the U.S. Attorney’s Office for the District of Maryland announced criminal charges against Merrill, Ledford and Jezierski.

"The defendants touted their purported investment expertise to siphon millions of dollars from unsuspecting investors," said Stephanie Avakian, co-director of the SEC's Division of Enforcement, in a statement. "We filed this action on an emergency basis to put a stop to this fraud and protect investors from further harm."

"We allege that the defendants engaged in a brazen fraud, deceiving investors to perpetuate their wrongdoing and line their pockets with ill-gotten gains," stated Kelly Gibson, associate regional director of the SEC's Philadelphia regional office. "Investors should be warned that low-risk, high-return investments that never lose should be a red flag."

The SEC's complaint charges Merrill, Ledford and Jezierski, along with their entities, Global Credit Recovery LLC, Delmarva Capital LLC, Rhino Capital Holdings LLC, Rhino Capital Group LLC, DeVille Asset Management Ltd., and Riverwalk Financial Corp., with violations of the antifraud provisions of the federal securities laws.

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