The Securities & Exchange Commission has charged CRE Capital Corp. with running a Ponzi scheme that sucked millions of dollars from investors.
Meanwhile, a hedge-fund operator in Florida has gone missing — along with $350 million in clients’ money. Although the Florida case is brand new and the SEC hasn’t announced a probe, it almost certainly will open one.
Arthur Nadel, 75, has been missing since Wednesday. The Sarasota Herald-Tribune reported Nadel left a suicide note in a case that’s already being called a “mini-Madoff.”
In the CRE Capital case, the SEC accused the Alpharetta, Ga., company and its president, James G. Ossie, of paying off old investors with money from new investors to create the illusion of profitability.
Ossie and CRE suffered steep losses, the SEC said in its complaint.
“In April 2008, CRE and Ossie opened a trading account in the name of CRE at Forex.com, a division of Gain Capital Group, LLC (“Gain Capital”). CRE and Ossie deposited over $5 million into the Forex.com trading account. Since June 18, 2008, CRE and Ossie traded foreign currency futures in the Forex.com account and incurred losses totaling over $4 million, including commissions and fees.
“On or about December 2, 2008,” the SEC continued, “CRE and Ossie represented to Forex.com, in response to inquiries from that firm, that all of the funds they had deposited into CRE’s trading account were their own funds, and not those of customers or investors. These statements were false.
“In approximately June 2008,” the SEC said, “CRE and Ossie opened a second trading account in the name of CRE in London, at Deutsche Bank. From June through December 2008, CRE and Ossie transferred $12 million of investor funds to the Deutsche Bank trading account in London. From June 2008 through January 8, 2009, CRE and Ossie’s currency trading in the account generated losses totaling $8,067,032.40.”
CRE’s assets have been frozen and a receiver has been appointed.
“CRE and Ossie fraudulently obtained at least $25 million from investors during 2008 by representing that it would use their money to engage in a currency trading program,” the SEC said. “Most investors were advised that they would receive guaranteed returns of 10 percent every 30 days, although a few investors were promised as much as 20 percent.
The company employed multiple layers of deception to fleece investors, the SEC said.
“CRE also falsely claimed that the firm and its program were audited by an outside accounting firm, which had concluded that CRE was not a Ponzi scheme,” the SEC said.
Ossie and CRE also were charged with fraud “relating to their offer to sell $100 million in CRE stock that was slated to begin in early 2009,” the SEC said.
“The SEC’s emergency action in this case will protect investors from further harm — both those who have invested and need all remaining assets preserved as well as those who were contemplating an investment,” said Katherine S. Addleman, regional director of the SEC’s Atlanta regional office.
“We also want to remind investors to be skeptical of promoters promising exorbitant returns. Such claims should be a red flag to investors,” Addleman said.
In the Nadel case, investors grew suspicious when they did not receive statements this month. The Herald-Tribune reported that one of the funds — “Scoop” — in Nadel’s three-fund portfolio could not meet a year-end demand for $50 million in redemptions.
The others were known as “Viking” and “Valhalla.”
People have filed complaints with Sarasota police — not the usual place one goes to file an investment-fraud report — but a place that demonstrates the word “Ponzi” has become positively nuclear.
As was the case with the alleged Madoff Ponzi, local charities have been affected, as have investors’ sense of security and retirement income.
And to think that some members of AdSurfDaily accorded Ponzi operator Andy Bowdoin folk-hero status.