According to a complaint filed on November 15, 2011, the defendants committed acts to assist a now defunct company in its Ponzi scheme, thereby violating federal, Pennsylvania, and Colorado securities Laws. Defendants are companies, law firms, accounting firms, and individuals that committed acts to assist the Company in the Ponzi Scheme.
According to the allegations, the securities fraud resulted from a Ponzi scheme orchestrated by the now bankrupt Company and its related entities and affiliates, which are named defendants, from approximately September 2007 to November 16, 2009.
The Company raised over $54 million from more than 300 investors from fraudulent and unregistered securities offerings. While touting potential returns ranging from 17% to more than 450%, the Company was allegedly an elaborate Ponzi scheme, using a substantial portion of investor funds from its securities offerings to pay returns to existing investors. The complaint describes the Company’s operations consisting of 11 operating divisions and 32 wholly-owned or affiliated companies, purported to be primarily engaged in the development of several planned residential communities in rural Tennessee, and the production and sale of “biochar” – a charcoal substitute made from organic waste. In addition to these primary ventures, the Company also claimed, in various investment offerings, to have diverse operations ranging from mortgage banking to hip-hop record production.
The Plaintiffs allege that the operations generated no revenue with which to pay the touted extraordinary investment returns. Instead, the Company only paid investor returns using offering proceeds from new investors in a classic Ponzi scheme fashion; then exhorted the paid investors to provide “testimonials” which the Company used to lure new investors.
The Company offered its investments primarily through the named Defendants in this action and its principals who advertised on television, radio, and print media to draw prospective investors to seminars, Internet “webinars”, internet radio shows and telephone conference calls. At these seminars and other presentations, investors, many elderly or new retirees, were urged to move at the “speed of wealth” by liquidating all traditional investments such as retirement plans and home equity, in order to purchase the Company’s short-term securities.
The Company and one of its subsidiary companies, however, were not licensed to sell securities and none of their offerings complied with the requirements of the Securities Exchange Act.
The Securities and Exchange Commission sued the Company, a subsidiary company, and their principal shareholders to enjoin their scheme on November 16, 2009. At the time the SEC intervened, of the more than $54 million raised, only $790,000 remained in its 40 frozen bank accounts.
On August 5, 2011, the District Court entered summary judgment against the Company for various violations of the securities laws, including: the sale of unregistered securities, acting as unregistered broker-dealers, and fraud in the offer and sale of securities in violation of Section 10(b) of the Exchange Act.
The plaintiffs claim that the Company’s scheme was enabled and facilitated by the acts and omissions of the defendants named herein. While some defendants helped funnel monies for both the Company and its subsidiary, others prepared the unregistered securities offerings and served as executives in charge of the Company’s daily operation. Without their involvement, substantial assistance, and/or disregard of their responsibilities, the scheme could not have been successful and Plaintiff and the Class would not have suffered substantial losses.
On December 21, 2012, the Court granted the Defendants motions to dismiss in this case.
On May 15, 2013, the Court issued an Order appointing lead plaintiffs and approving the selection of lead counsel.
On October 21, 2013, the Plaintiffs filed an amended complaint.
On July 10, 2013, the Plaintiffs and certain Defendants entered into a Settlement agreement.
On February 14, 2014, the Plaintiffs filed a Notice of the voluntary dismissal of a certain defendant.