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Tag: Smith & Co.

  • Another Ponzi Halted In New York; SEC Says Matthew J. Ryan Targeted Senior Citizens In Scheme Involving Company That Existed In Name Only

    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.

    It was the second Ponzi scheme to rock the Albany area — and the third major case of financial fraud in New York state — in the past two weeks.

    “Ryan obtained these investments by fostering the false impression that American Integrity is a legitimate, substantial financial services firm, with numerous employees and for which he was merely an employee,” the SEC charged.

    ‘Phony Manhattan Address’

    “To perpetrate this fraud, Ryan used devices such as a phony Manhattan address, and fictitious names and titles of purported American Integrity employees, and he misrepresented to investors that their investments were safe and insured by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC) and that American Integrity was qualified to offer IRAs and other tax-deferred investments,” the SEC charged.

    American Integrity was a “classic Ponzi scheme,” the SEC said.

    ‘Merely The Name On A Bank Account’

    The firm “is not even an entity, let alone an operating financial company and investments in it are not in any way insured,” the SEC said. “It is merely the name on a bank account that Ryan opened and controls. Ryan simply took investors’ money and deposited the money into the bank account. When he needed money to pay investors the returns he had promised or principal amounts they sought to withdraw, Ryan simply withdrew funds from the same bank account.

    Investor funds were used to pay Ryan’s lenders “and to pay for his own personal expenses, including luxury cars,” the SEC said. “As of March 31, 2010, it appears that American Integrity owed investors at least $3.5 million, while it had less than $8500 in cash on hand.”

    Recent New York Frauds

    Just days ago, the SEC charged McGinn, Smith & Co. of Albany in a fraud case investors said was a Ponzi scheme. Separately, the SEC charged Gryphon Holdings Inc. in a bizarre stock-tips scheme. Five people were arrested by federal agents in the Gryphon Holdings case.

    Gryphon “touted offices on Wall Street and around the world while, in reality, defrauding investors from a strip mall on Staten Island,” David Rosenfeld, associate director of the SEC’s New York Regional Office, said on the day the complaint was filed.

    The SEC said Gryphon was a “sham designed to separate clients from their money.”

  • FINRA/SEC Move Against New York Firm; Second Major Case In 24 Hours; Clients Suspect Colossal Ponzi Fraud At McGinn, Smith & Co.

    Another investigation into allegations of spectacular financial fraud is under way in New York. The case against McGinn, Smith & Co. of Albany is the second to rock the state in the past 24 hours.

    The Financial Industry Regulatory Authority (FINRA) filed a complaint against the company and its president David L. Smith yesterday. The SEC filed a complaint immediately on the heels of FINRA’s complaint, alleging a stunning fraud that may involve at least $120 million.

    “McGinn and Smith deceived investors about the true purpose behind these offerings,” said Andrew M. Calamari, associate director of the SEC’s New York Regional Office. “They falsely promised investors a profitable payday but secretly siphoned off money for their own payroll.”

    Multiple companies are involved, the regulators said. None of the offerings was registered, and the firm has been charged with selling unregistered securities. The SEC is seeking an emergency asset freeze.

    “[T]he debt offerings have been sold to hundreds of investors through four funds and at least 18 trusts created by MS & Co. affiliates,” the SEC said. “They made a host of representations about the extent of due diligence they had performed, among other things. Contrary to their representations to investors, McGinn and Smith used much of the money raised in these offerings to make prohibited investments in their other businesses or make unsecured loans to financially support them.

    “They also misused investor funds to pay exorbitant commission and transaction fees to their affiliated entities and make interest payments to investors in the other entities,” the SEC said.

    For its part, FINRA said “Smith and McGinn provided falsified documents, submitting backdated promissory notes for personal loans they and others previously received from two of the Related Entities.”

    The SEC added that “the full extent of the fraud is not yet known, [but] it appears that investors are currently owed at least $80 million.” Losses could total $84 million or more, according to court filings.

    Named defendants by the SEC were McGinn, Smith & Co. Inc.; McGinn, Smith Advisors LLC; McGinn, Smith Capital Holdings Corp.; First Advisory Income Notes LLC (FAIN); First Excelsior Income Notes LLC (FEIN); First Independent Income Notes LLC (FIIN); Third Albany Income Notes LLC (TAIN); Timothy M. McGinn and and David L. Smith.

    Clients became worried last year, the SEC said.

    “In 2009, Smith and McGinn received e-mails telling them the investors were wondering ‘if they’ve bought into a Ponzi Scheme,’ and a MS&Co. broker reported to McGinn and Smith that there are ‘many people who refer to our deals as a Ponzi Scheme,’” the SEC said.

    “As of September 2009, it appears that investors in the four Funds were owed at least $84 million, that the Four Funds had less than $500,000 in cash on hand, and that their remaining assets were worth only a small fraction of the amount owed to investors,” the SEC said.

    “Similarly, the Trusts have a negative equity of approximately $18 million, and have never had the ability to pay the interest rates promoted to investors and also pay back principal,” the SEC continued. “Nonetheless, McGinn and Smith have continued to raise money from investors, using similar misrepresentations, as recently as December 2009. During the first few months of 2010, contrary to representations to investors, McGinn and Smith have continued to drain what little cash remains through payment of ‘fees’ to themselves.”

    In the past 24 hours alone, investigators in New York have alleged that separate financial frauds involving multiple companies and individuals may have fleeced investors out of $101.5 million or more.

    Earlier today, federal prosecutors and the SEC moved against Gryphon Holdings Inc. and related entities of Staten Island. Five people were arrested in the case, which the SEC said involved the illicit collection of at least $17.5 million over the past three years.