BULLETIN: Five people have been arrested in New York on charges of conspiracy to commit securities fraud and wire fraud.
Their preliminary court appearances are occurring now — and the allegations in the case are spectacular.
Separately, the SEC has gone to federal court in New York to obtain an emergency court order freezing the assets of a company and defendants allegedly involved in the fraud. The company is a Staten Island investment-advisory business that allegedly sold bogus stock tips from “fictional trading experts.”
Federal prosecutors said the firm has no trading desk, despite professing to have a “legendary” one. Prosecutors added that false academic claims about “Harvard, Oxford, Colombia, and Wharton” were part of the scheme — and that the purported ringleader used multiple names to pull off the fraud.
U.S. District Judge Jack B. Weinstein of the Eastern District of New York granted the emergency freeze.
Charged criminally in the case were Kenneth E. Marsh, 43, of Staten Island; Baldwin Anderson, 55, and Robert Anthony Budion, 28, both of Staten Island, Jeanne Lada, 44, of Freehold, N.J., and James Levier, 34, of Beachwood, N.J.
Each of the criminal defendants also was named a defendant in the SEC’s civil case, which also names Gryphon Holdings Inc., which is operated by Marsh.
Several relief defendants who benefited from Gryphon’s alleged misconduct also were named in the SEC’s civil complaint.
“Gryphon and its associates attracted clients through postings on the Internet that falsely exaggerated their investment prowess,” said George S. Canellos, director of the SEC’s New York Regional Office. “They sold a bill of goods by pretending to be legitimate money managers with a long track record of extraordinary returns, distinguished clients, and hundreds of millions of dollars under management.”
The company “touted offices on Wall Street and around the world while, in reality, defrauding investors from a strip mall on Staten Island,” said David Rosenfeld, associate director of the SEC’s New York Regional Office.
“Gryphon was nothing more than a sham designed to separate clients from their money,” Rosenfeld said.
Like other recent securities cases, the complaint reads almost like a work of fiction. Multiple company names were used, and multiple aliases were used to pull of the scam, authorities said.
“Gryphon is a New York corporation doing business under various names, including Gryphon Holdings, Gryphon Financial, Gryphon Daily, Gryphon Consulting Group, Gryphon Hedge Fund Partners LLC, Gryphon Management Hedge fund, Gryphon Financial UK Ltd, and Gryphon Australia,” the SEC said in the complaint.
“Gryphon’s physical offices are located in a strip mall in Staten Island, New York, but the firm’s Internet posts depict an international operation with offices located on Wall Street, in Chicago, California, London, England, and Australia,” the SEC said. “The firm claims to have twenty-five to thirty employees and affiliations with expert, successful securities traders.”
The defendants also used aliases, the SEC said.
“In communications with Gryphon’s prospective or existing clients, Defendant K. Marsh has used various aliases, including ‘Kenneth Maseka,’ ‘Michael Warren,’ and ‘Marcus Thorn,’” the SEC said. Federal prosecutors added that “Warren†and “Maseka†are fictional, and the SEC said “Thorn” was, too.
Other bogus storylines and identities included “Chris Wolfe,” whose average profit since 1995 purportedly ‘exceeded 1000% per trade’; ‘Marc Seigel,’ who purportedly ‘manage[s] in excess of 700 million in daily option trading volume’ and whose ‘talents trading options can be traced back five generations’; ‘John Gage,’ a graduate of Columbia and Wharton, a partner at Gryphon Financial and head of ‘equity Hedge Strategies,’” the SEC said.
The bogus “Marcus Thorn” was claimed to have “delivered ‘189% gain’ on an ‘Intel play in one day,’” the SEC said.
Marsh was banned in 2007 by the National Association of Securities Dealers, the predecessor to the Financial Industry Regulatory Authority, “from associating in any capacity with any firm that is a member of the NASD,” the SEC said.
“Since at least 2007, Gryphon has advertised its services on several websites, which at various times included, among others, www.gryphondaily.com, www.gryphonfmancial.net, www.poisonpilltrader.com, www.cnbceffect.com, www.6ammoneymachine.com,” the SEC said.
“Gryphon describes itself as the ‘World’s No. 1 Investment Newsletter,’ and provides its investment recommendations through various services bearing names such as ‘6AM Money Machine,’ ‘Raging Bull,’ ‘Wolves of Wall Street,’ ‘Wall Street’s Most Wanted,’ ‘Put Play of the Day,’ ‘Pure Profit,’ ‘WolfOption Trader VIP,’ ‘Elite Option Service,’ ‘Inner Circle,’ ‘Brain Trust,’ and ‘Mafia Trader.’ Once a client pays Gryphon for one or more of these advisory services, Gryphon representatives provide the client with investment recommendations on an individualized basis via telephone, e-mail, and/or through a password-protected section of Gryphon’s website,” the SEC said.
Meanwhile, the SEC said fake testimonials were part of the scheme.
“Gryphon’s website and promotional materials were also replete with false testimonials from clients about its performance and affiliations, and a purported endorsement of Gryphon by George Soros, that in fact Gryphon fabricated.
“Gryphon claimed that Soros stated: ‘Alone the traders of Gryphon Financial are incredible, together the [sic] are unstoppable.’Â The client testimonials falsely attested to the success of Gryphon’s recommendations, which purportedly resulted in a ‘huge nest egg,’ the ability to buy expensive cars, and freedom to no longer work,” the SEC charged.
The scheme gathered more than $17.5 million over the past three years, the SEC said.
Read the agency’s astonishing complaint.
American Integrity Financial Co. existed in name only, the SEC said today. Its operator, Matthew J. Ryan, 45, of Troy, N.Y., used the bogus company to fleece senior citizens in a Ponzi scheme by telling them they’d earn “guaranteed” return rates of 3.85 percent to 9 percent each year.