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SEC Sues Retail Investment Adviser Over $8M Ponzi Scheme

SEC Sues Retail Investment Adviser Over $8M Ponzi Scheme

SEC Sues Retail Investment Adviser Over $8M Ponzi Scheme

Yet Another Ponzi Scheme Real Estate Development Scam

By Scott Starr

Law 360’s Dean Seal recently reported on yet another Ponzi scheme real estate development scam.  The article follows.  The scam described below is identical to two cases handled by Starr Austen & Miller within the last seven years, although unfortunately the cases we handled dealt with losses much larger than the $7 million referenced below.  If you or a loved one invested your hard earned money with an insurance agent, stock broker, or registered investment advisor for the purpose of purchasing real estate, and you are not getting all of your questions answered, not getting proof what real estate has been purchased with your money, and are basically “getting the run around,” you may be the victim of another Ponzi scheme real estate development scam.  Call Starr Austen & Miller today for your free no obligation consultation to learn about your rights and remedies.

 


SEC Sues Retail Investment Adviser Over $8M Ponzi Scheme

By Dean Seal of Law360.com

The U.S. Securities and Exchange Commission filed a suit in New York federal court Wednesday alleging that a former Lombard Securities Inc. investment adviser defrauded at least nine retail investors in an $8 million Ponzi scheme.

According to the SEC, 58-year-old Steven Pagartanis used false and misleading statements to solicit $8 million from long-standing brokerage customers, most of whom were retired, on the pretense that the investments would go toward a land development company.

“Contrary to his promises that he would make safe investments that would yield monthly return payments, Pagartanis never made any investments,” the SEC’s complaint said. “Instead, Pagartanis deposited the investor funds into various bank accounts that he controlled and then used the funds, among other things, for his personal benefit and to make monthly return payments to investors in a Ponzi scheme-like manner.”

The SEC’s complaint states that Pagartanis, of East Setauket, New York, was a registered representative of Lombard between September 2017 and March 2018 and had been associated with various other broker-dealers since 1989. Using the long-standing relationships he had built with his customers at Lombard and his previous firms, Pagartanis raised $8 million between 2013 and this year from at least nine investors who “trusted Pagartanis and relied on his investment recommendations,” the SEC said.

Pagartanis is alleged to have promised a guaranteed repayment of principal with a fixed percentage return of between 4.5 and 8 percent annually and told at least five of the investors that they were investing in shares of the publicly traded Genesis Land Development Co., a Canadian land development and home building company. He was able to raise at least $6.7 million from those investors, while pulling in more from other investors who were told more generally they were investing in a land development company, the SEC said.

The investors were told to make their checks payable to “Genesis,” but they were deposited solely into a bank account for Genesis I Holdings LLC, a separate entity of which Pagartanis was the sole principal and owner, the SEC claims. The money never made it to the development company, although Pagartanis provided some of the investors with fictitious account statements indicating that they owned stock in the company, according to the complaint.

Pagartanis used around $1.8 million to make monthly payments back to investors while using the rest to pay personal expenses, the SEC claims. The scheme began to crumble early this year when Pagartanis stopped making monthly payments to investors, who then contacted him to get their money back, the complaint said. Pagartanis allegedly ignored these requests and failed to appear for two March 2018 interviews, one with Lombard’s compliance staff and another with the Financial Industry Regulatory Authority, that were connected to investor complaints.

Pagartanis was subsequently fired from Lombard and barred by FINRA. According to the SEC, he has also been hit with criminal charges in state court.

The SEC is seeking an order for Pagartanis to disgorge his ill-gotten gains, alleging violation of two anti-fraud provisions of the federal securities laws, plus prejudgment interest, and pay civil monetary penalties.

“Pagartanis preyed on his customers’ trust, duping them to write checks payable to his own entity,” Marc P. Berger, director of the SEC’s New York regional office, said in a statement. “Regardless of how long investors have worked with their brokers, they should always confirm that recommended investments are approved for sale by their brokerage firm before transferring funds.”

Contact and counsel information for Pagartanis was not immediately available Wednesday.

The SEC is represented in-house by Haimavathi Marlier, Sheldon Mui and Lara Shalov Mehraban.

The case is SEC v. Pagartanis, case number 2:18-cv-03150, in the U.S. District Court for the Eastern District of New York.

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The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.