by T. GormanPosted on Posted in SECActions

Ponzi schemes have been a key focus for SEC enforcement at least since the days of Bernie Madoff. The typical Ponzi scheme is, in reality, nothing but a lie or sham transaction – the operator sells shares of a company that does not actually exist. In the Commission’s most recently settled such action, the Ponzi scheme was only one facet of the fraud. The other was a scheme that supposedly provided guaranteed returns for investors, an offering fraud. There were no returns. SEC v. Bryant, Civil Action No. 4:17-cv-00336 (E.D. Tex.).

Named as defendants in the action were Thurman P. Bryant, III; Bryant United Capital Funding, Inc.; Arthur F. Wammel; and Wammel Group LLC.

In May 2017 Mr. Bryant and Bryant United raised about $22.7 million from investors. Investors were told that if they acquired interests, they would have guaranteed investment returns in the mortgage industry. A related operation conducted by Defendant Wammel and his firm, Wammel Group. It was a Ponzi scheme that raised about $44.7 million. The complaint alleged violations of Securities Act Section 17(a) and Exchange Act Section 10(b).

Respondents resolved the matters, consenting to the entry of permanent injunctions based on the Sections cited in the complaint. Specifically, the court enjoined Mr. Bryan and Bryant United from future violations of the two Sections cited in the complaint. In addition, Mr. Bryant and his firm were directed to pay disgorgement of $5,989,605.50 along with prejudgment interest of $227,392.17. The final judgments deem those amounts paid by the sums collected by a court-appointed receiver, and distributions to investors and by the restitution of $9,103,088.12 ordered against Mr. Bryant, in U.S. v. Bryant, No. 4:17-cr-00213 (E.D. Tx.) and against Mr. Wammel in U.S. v. Wammel, No. 4:17-cr-00213 (E.D. Tx.). See Lit. Rel. 26252 (Feb. 20, 2025).

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by T. GormanPosted on Posted in SECActions

One of the classic frauds is the “to good to be true” deal. All too frequently investors hear about an opportunity that is so good it becomes virtually impossible to turn down. These are the “once in a lifetime” and just “too good to be true” deals that virtually compel the investor to put up funds and do the deal even though on the surface it seems all too good to even believe. While some can walk past such deals, many cannot. In those instances, the investor puts up his or her hard earned cash. In those instances, the investor is often reminded of what he or she learned long ago – if it is too good to be true, then typically it is – walk away. The Commission’s latest enforcement action is just this and more, with a twist. SEC v Shah, Civil Action No. 5:25-cv-01666 (N.D. Ca. Filed Feb. 18, 2025).

Named as defendants in the case are Harshad Shah, Virendra Parekh and Namah Wealth Creation & Preservation, L.P. The firm, a California limited partnership formed in 2020, is owned by the two individual defendants. Defendant Harshad Shah is a general partner and co-owner of Namah Wealth. He is a broker and holds two licenses issued by FINRA. Defendant Virendra Parkh is a partner and co-owner of Namah Wealth. He is also a licensed California insurance agent.

In February 2020 Defendants encountered an investment opportunity, a “funding note” issued by Hamah Wealth to a California investor. The note required an investment of $1.5 million. The individual Defendants marketed the Funding Note to an existing insurance client. Part of the pitch falsely claimed that Defendants would purchase insurance to guarantee returns. They did not.

Subsequently, Defendants became interested in a second opportunity – a Cyprus firm, Xiperias Ltd. According to the agents of that firm, if Defendants put a minimum of $1.3 million with Xiperias, they would obtain guaranteed returns of 100% every three months. Xiperias provided no information about the mechanics of the investment – how could a 100% return be generated so quickly? When asked the firm stated that the process was confidential. Defendants Shah and Parekh made the investment.

As of December 2024, no returns were paid by Xiperias. Defendants did not obtain the promised insurance to guarantee the returns on the note. The investor’s funds were not repaid with the exception of about $45,000. The complaint alleges violations of Exchange Act Section 10(b) and Rule 10b-5, as well as Securities Act Section 17(a). See Lit. Rel. No. 26248 (Feb. 18, 2025).

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