South Florida Prime Bank and Overseas Debt Instruments Fraud and Misrepresentation Litigation and Arbitration Attorny:
Securities and Exchange Commission v. Malom Group AG, Martin U. Schläpfer, Hans-Jürg Lips, et al., Civil Action No. 2:13-cv-2280 (D. Nev. Dec. 16, 2013)
SEC Charges Perpetrators of Prime Bank Schemes in Las Vegas and Switzerland
The Securities and Exchange Commission recently filed fraud charges against a company named with an acronym for “Make A Lot Of Money” that is behind a pair of advance fee schemes guaranteeing astronomical returns to investors in purported prime bank transactions and overseas debt instruments.
The SEC alleges that Swiss-based Malom Group AG and several individuals conducted the schemes from Las Vegas and Zurich. They raised $11 million from U.S. investors by using a series of lies and forged documents to steer them into seemingly successful foreign trading programs that were nothing more than vehicles to steal money. Advance fee frauds solicit investors to make upfront payments before purported deals can go through, and perpetrators fool investors with official-sounding terminology to add an air of legitimacy to the investment programs. Many transactions offered by Malom bore the hallmarks of prime bank frauds, which tout the supposed use of well-known overseas banks to attract investors.
The SEC alleges that Malom charged investors fees for bogus services, and the individuals pulling the strings distributed investor funds among themselves for personal use. They further lied to investors who later inquired about the progress of the transactions, lulling them with excuses about why they have yet to receive investment returns or refunds.
In a parallel action, the U.S. Department of Justice today announced criminal charges against the same six individuals charged in the SEC’s complaint:
- Martin U. Schläpfer of Switzerland, who has been described as Malom’s chief executive officer, managing director, and legal counsel.
- Hans-Jürg Lips of Switzerland, who has been described as the Malom’s president or chairman of the board of directors.
- James C. Warras of Waterford, Wisc., who has been described as Malom’s executive vice president.
- Joseph N. Micelli of Las Vegas, who has been described as Malom’s compliance officer.
- Anthony B. Brandel of Las Vegas, who served as Malom’s main point of contact with U.S. investors – explaining the investments, collecting investor funds, and lulling investors about the status of the transactions. His Las Vegas company, M.Y. Consultants, also is charged in the SEC’s complaint.
- Sean P. Finn of Whitefish, Mont., who recruited U.S. investors through his Wyoming-based company M. Dwyer LLC, which also is charged in the SEC’s complaint.
According to the SEC’s complaint, filed in U.S. District Court for the District of Nevada, the schemes occurred from 2009 to 2011, and lulling of investors continued through 2013. None of the transactions in securities offered or sold were registered with the SEC or eligible for an exemption. In the first scheme, they offered “joint venture” agreements that purportedly allowed investors to “use” Malom’s financial resources in exchange for an upfront fee. The agreements required the investors to propose investment transactions for Malom to enter into with third parties in order to generate returns for the company and the investor. Malom supplied investors with forged bank statements and “proof of funds” letters to give the false impression that the company had the millions of dollars needed for the transactions. Before investors paid their upfront fees, the Malom executives and promoters typically knew at least the basic details of the proposed trading programs, in some cases actually providing the trading program for investors to propose. But after receiving the upfront fees from investors, Malom proceeded to reject every proposed transaction and misappropriate investor funds to further the scheme and line the perpetrators’ pockets.
According to the SEC’s complaint, the second scheme falsely promised investors that Malom would generate funding by creating structured notes that would be listed on “Western European” exchanges. After inducing investors to pay an “underwriting fee” and making personal and corporate guarantees of repayment, Malom reneged on the guarantees of repayment and failed to issue any structured notes. Again the perpetrators behind the scheme quickly distributed investor funds among themselves.
The SEC’s complaint alleges that Malom, its principals and agents Martin U. SchlÃ¤pfer, Hans-Jurg Lips, James C. Warras, and Joseph N. Micelli violated the antifraud and securities registration provisions of the federal securities laws, specifically, Section 17(a) and Section 5 of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and, except as to Malom Group, they aided and abetted violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Further, the SEC’s complaint alleges that M.Y. Consultants, Inc., Anthony B. Brandel, M. Dwyer LLC, and Sean P. Finn violated the antifraud and securities and broker-dealer registration provisions of the federal securities laws. Specifically, the complaint alleges that these defendants violated Sections 17(a) and 5 of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 15(a) of the Exchange Act; and that they aided and abetted violations of Section 17(a) of the Securities Act Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest thereon, and civil penalties against each defendant.
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