SEC: Utah Ponzi Schemer With ‘Loans’ Program Ripped Off Church Associates, Family Members, Friends, Seniors — And Some Of The Money Went To ‘Multilevel Marketing And Web-Based Advertising Business Opportunities’; Separately, Newspaper Reports Allegations Of Cash Handoffs To Investors In Parking Lots

In the latest affinity-fraud scheme detected in Utah, an Orem man conducted a $4 million offering fraud and Ponzi scheme aimed at church associates, family members and friends, including senior citizens and the “recent widow of a church associate” whom he volunteered to help with finances after she lost her husband, the SEC said.

Some of the money scammed by Steven B. Heinz was used “to pay his adult children to fund various business opportunities they are involved in, including multilevel marketing and web-based advertising business opportunities,” the agency said.

The SEC did not identify the “programs” in a complaint filed yesterday that led to an emergency asset freeze.

Heinz is 56. He is associated with a “financial planning and insurance” entity known as S.B. Heinz & Associates Inc. of Provo, the SEC said.

“Heinz promised some investors that they would earn tax-free income if they provided a ‘loan’ to Heinz to invest for them,” the SEC said.

And Heinz “has issued investment contracts to investors which guarantee returns ranging from 6% to 120% per year,” the SEC alleged.

Separately, the Deseret News is reporting allegations that he “paid returns in cash, often asking his clients to meet him in grocery store parking lots for the handoff.”

Regulators and law enforcement have been warning for years about affinity fraud in Utah.

From a statement yesterday by the SEC (italics added):

The complaint alleges that since January 1, 2012, Heinz acted as an investment adviser and solicited nearly $4 million from more than fifteen former clients, family members, and friends to enable him, through his company S.B. Heinz, to execute rapid buy and sell orders of futures contracts. The complaint further alleges that investor funds are being used to falsely create the appearance of a successful investment business although S.B. Heinz has actually lost approximately $1.5 million executing Heinz’s high risk futures contract trading activities. In addition, the complaint alleges that Heinz pays “returns” to earlier investors using new investor funds, used investor funds for his own personal purposes and that S.B. Heinz used investor funds to pay business expenses, including the salary for its secretary and its office rent.

Named a relief defendant in the case as the alleged recipient of ill-gotten gains was Susan K. Heinz, Heinz’s wife. The SEC said Heinz “reportedly makes large monthly cash payments to his wife” and alleged that he’d drained $1 million to fund “personal expenses such as paying for family members to accompany him to Mexico on vacation.”

In addition to duping the widow, the SEC said, Heinz also duped an elderly couple.

Heinz, the SEC alleged, “convinced the elderly couple to liquidate their investments and invest those funds with him personally. Heinz did not disclose to the couple that they would incur $45,000 in penalties as a result of early liquidation of their investments.”