BULLETIN: Two men have been charged by the SEC with fraud in an alleged Ponzi scheme that features allegations that read like fiction — although the agency says they are true.
Among the SEC’s spectacular claims is that Ponzi payments to investors were made after the 93-year-old boyfriend of the elderly mother of one of the scheme’s accused operators deposited $100,000 with the scheme. The scheme also traded fraudulently on the names of Major League Baseball, Paul Allen, co-founder of Microsoft, and Ted Turner, founder of CNN.
Charged in the alleged caper were Ronald Abernathy of Scottsdale, Arizona, and Arthur Weiss of Pasadena, Calif., and Delray Beach, Fla. Also charged was their company: Sovereign International Group LLC (SIG) of Nevada.
Abernathy is 66; Weiss is 61. Both men were pitchmen for other fraud schemes, and used a deposit made by the elderly boyfriend of Weiss’s elderly mother to make payments to investors in their most recent scheme, the SEC charged.
At the time the elderly man deposited $100,000 with Weiss and Abernathy, the SEC charged, their bank accounts “collectively held less than $500.”
The elderly man’s deposit subsequently was appropriated to make $14,450 in Ponzi payments to earlier investors, the SEC charged. All in all, the agency alleged, the scheme gathered $560,000 through the sale of fraudulent promissory notes and investment contracts.
When investors demanded the return of their funds, Weiss and Abernathy piled on the excuses. Investors were told the men traded in “precious ore concentrate,” along with “multi-million and multi-billion dollar financial instruments” and “fine art,” the SEC charged.
But it was all just a massive scam — one that included a claim that the men were in “possession of a ‘medium term note’ issued by an entity called ‘U.S. Financial Agency LLC’ with a purported face value” of $50 million, the SEC charged.
“The U.S. Financial Agency Note is worthless,” the SEC charged.
Prior to issuing a Summer 2009 update to investors, “Abernathy attempted to deposit the U.S. Financial Agency Note with Banc of America Investment Services,” the SEC charged. “BAI rejected the worthless U.S. Financial Agency Note. After this rejection by BAI and despite their knowledge that the U.S. Financial Agency Note was worthless, the Defendants issued the Summer 2009 update which falsely told investors that SIG had been assigned and was in possession of more than $50 million in corporate assets.”
As payments to investors became further delayed, the men falsely told an investor that they “were in the final stages of a deal that would result in a $15,000,000 to $20,000,000 payout to SIG and that the only thing delaying the payout is the U.S. Department of Homeland Security which was following its standard procedure to make sure that the money involved in the deal had no ties to terrorist organizations or drug trafficking,” the SEC charged.
“SIG, in its entire existence, has not earned any profits, realized any returns or generated any revenue from any business operations,” the SEC said. “SIG’s only income has consisted of money received from investors.”
The SIG scam began in “late 2008,” the SEC charged.
Previous scams in which Abernathy and Weiss were associated were identified by the SEC as “G-5 Global,” “Safevest LLC” and “The Omicron Group LLC.”
Those three scams led to losses of about $14.7 million, the SEC said.
Read the SEC complaint.