We’re all too familiar with the doctrine of “caveat emptor”, or buyer beware, which places all responsibility for a bad deal on the shoulders of the consumer. Caveat venditor reverses that responsibility, placing all responsibility upon the seller. With financial products and services, both are true, as the case below shows. A quick check with http://brokercheck.finra.org/ would have saved these investors a lot of hassle and heartache. They would have discovered that these thieves were not registered to advise about nor sell investments. And the perpetrators, or sellers, should have been mindful of not only enforcement actions but also their clients’ best interests.
SEC Obtains Asset Freeze in Case of Investor Funds Stolen for Shopping Sprees
FOR IMMEDIATE RELEASE
Washington D.C., July 28, 2016 —
The Securities and Exchange Commission today announced an asset freeze it has obtained against three men who aren’t registered to sell investments and allegedly went on lavish shopping sprees with more than $5 million raised from investors to purportedly develop a resort.
In an emergency action filed in federal court in Atlanta, the SEC alleges that Matthew E. White, Rodney A. Zehner, and Daniel J. Merandi fraudulently issued $1 billion in unsecured corporate bonds out of a shell company they own and claimed the money would be used to fund the resort project. But they never came close to raising the funds necessary to start the project, and meantime they pocketed the $5.6 million they did raise and used it for personal purchases at Saks Fifth Avenue, Gucci, Louis Vuitton, Prada, and Versace.
“We allege that these men stole millions of dollars from investors for personal use and orchestrated sham transactions to prop up the price of the worthless, expired bonds at the center of the fraud,” said William P. Hicks, Associate Director of the SEC’s Atlanta Regional Office.
The SEC encourages investors to check the backgrounds of people selling them investments. A quick search on the SEC’s investor.gov website
would have shown that White, Zehner, and Merandi are not registered to sell investments.
The SEC’s complaint filed yesterday alleges that White, Zehner, Merandi, and their companies violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act of 1934 and Rule 10b-5. The SEC seeks permanent injunctions, disgorgement, and penalties against all of the defendants. The court order obtained late yesterday freezes defendants’ cash held in a brokerage account and freezes the bonds held in a separate brokerage account.
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