Group Told To Cough Up $51M Over Ponzi Scheme

Group Told To Cough Up $51M Over Ponzi Scheme - 4/15/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

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Group Told To Cough Up $51M Over Ponzi Scheme
Christine Caulfield

Securities Law 360. April 15, 2009
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EXCERPT: A federal judge has ordered two coal mining companies, an investment firm and a pair of executives to fork over a combined $51 million as part of a deal with the U.S. Securities and Exchange Commission to resolve charges that they scammed investors with a fairy tale involving a Saudi prince and Israeli gold. Judge Andrew Guilford of the U.S. District Court for the Central District of California entered final judgment Monday against Tri Energy Inc., H&J Energy Co. Inc., La Vie D'Argent, and executives Robert Jennings and Arthur Simburg, the SEC announced Wednesday. The defendants in the case allegedly recruited investors to their massive Ponzi scheme by telling them that their money was being used to help an unnamed Saudi Arabian prince move gold from Israel through Luxembourg to the United Arab Emirates and to fund a coal-mining operation, neither of which was true, the regulator said. The investors were led to think that their money would be used for humanitarian aid, according to the SEC. “Defendants recruited potential victims through claims that their investments were aimed, at least in part, at raising money for humanitarian and religious efforts,” the agency said. “The defendants promised their victims outlandish returns on their investments of 100 to 1,000 percent in as little as 60 days.” “In reality ... although some money had been paid out to investors, those funds appeared to have come from new investor money, and substantial amounts of investor funds had been transferred to bank accounts controlled by some of the defendants and relief defendants,” the SEC said. Over 500 investors lost more than $50 million in the scheme, according to the commission. As part of the settlement, Jennings and Simburg will each pay a civil penalty of $7 million, while the three companies will pay $35 million in disgorgement of profits, of which $28 million has already been returned as part of a restitution order in a parallel criminal case.

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