BULLETIN: Another Ponzi Scheme In South Florida; SEC Alleges $28 Million Fraud Against Trade-LLC

A Florida company — Trade-LLC — and its operators have been accused of running a $28 million Ponzi scheme that fleeced members of three investment clubs.

Named defendants by the SEC were Trade-LLC and its managing members, Philip W. Milton and William Center. The scam operated in the Palm Beach Gardens area, and affected more than 800 members of the investment clubs, the SEC said.

Investors were persuaded to “entrust Trade-LLC with money so that it could trade securities on the clubs’ behalf using its purported proprietary software trading program,” the SEC said.

“With claims of a sophisticated trading program and extraordinary returns, Milton and Center persuaded the clubs and their members to increasingly invest millions with Trade-LLC,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “They then blatantly lied to the clubs about the returns that were being achieved and hid the clubs’ losses by running a Ponzi scheme.”

U.S. Attorney General Eric Holder gave a speech in the Palm Beach area in January, warning fraudsters that they were writing their own tickets to jail. Florida has been pounded by both Ponzi schemes and cases of real-estate and mortgage fraud.

Milton already has agreed to settle the SEC charges against him, the SEC said.

Trade-LLC will be placed in receivership and also “has also consented to pay a civil money penalty to be determined by the court,” the SEC said. Milton has been ordered to return $2.3 million and pay a civil penalty of $130,000.

“Milton and Center used the clubs’ funds to pay themselves salaries of more than $2 million and $1 million, respectively, and to cover more than $1.3 million in business and other unrelated expenses,” the SEC said. “Milton and Center also transferred, without any legitimate basis, over $4.8 million of the clubs’ funds to three Florida companies they controlled.”

The case against Center remains unresolved.

Named relief defendants in the case were the three companies controlled by Milton and Center. They were identified by the agency as BD LLC, TWTT-LLC and CMJ Capital LLC. All of the companies have been placed in receivership and have agreed to a settlement and to disgorge ill-gotten gains, according to the SEC.

Assisting in the probe were the CFTC and the Florida Office of Financial Regulation.