Gavel and scales

SEC charges perpetrators of prime bank schemes in Las Vegas and Switzerland

Tue, 17/12/2013 - 10:10

The Securities and Exchange Commission has charged the company behind a pair of advance fee schemes guaranteeing astronomical returns to investors in purported prime bank transactions overseas debt instruments.

The SEC alleges that Swiss-based Malom Group AG – an acronym of “Make A Lot Of Money” – and several individuals conducted the schemes from Las Vegas and Zurich. 
 
They raised USD11m from US 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 Group bore hallmarks of prime bank frauds, which tout the supposed use of well-known overseas banks to attract investors. 
 
The SEC alleges that Malom Group charged fees to investors 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.
 
“Under the guise of a name insinuating they would make a lot of money for investors, the individuals behind this scheme sought nothing more than to make a lot of money for themselves,” said Stephen L. Cohen, an associate director in the SEC’s division of enforcement.  “They peddled agreements and transactions filled with technical-sounding jargon that was as meaningless as their promises to investors.”
 
In a parallel action, the US Department of Justice today announced criminal charges against the same six individuals charged in the SEC’s complaint:
 
•             Anthony B Brandel of Las Vegas, who served as Malom Group’s main point of contact with US 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 US investors through his Wyoming-based company M Dwyer LLC, which also is charged in the SEC’s complaint.
 
•             Hans-Jürg Lips of Switzerland, who has been described as the Malom Group’s president or chairman of the board of directors.
 
•             Joseph N Micelli of Las Vegas, who has been described as Malom Group’s compliance officer. 
 
•             Martin U Schläpfer of Switzerland, who has been described as Malom Group’s chief executive officer, managing director, and legal counsel.
 
•             James C Warras of Waterford, Wisconsin, who has been described as Malom Group’s executive vice president.
 
According to the SEC’ s complaint filed in US District Court for the District of Nevada, the schemes occurred from 2009 to 2011 and the lulling of investors continued into 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 Group’s financial resources in exchange for an upfront fee.  The agreements required the investors to propose investment transactions for Malom Group to enter into with third parties in order to generate returns for the company and the investor.  Malom Group 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 Group executives and promoters typically knew at least the basic details of the proposed trading programmes, in some cases actually providing the trading program for investors to propose.  But after receiving the upfront fees from investors, Malom Group 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 Group 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 Group 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 Group, Schläpfer, Lips, Warras, and Micelli violated the antifraud and securities registration provisions of the federal securities laws, and Brandel, Finn, MY Consultants, and M Dwyer LLC violated the anti-fraud and securities and broker-dealer registration provisions.  The SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.


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