International Law

Creative Capital Consortium Ponzi

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From the SEC Press Release:

The United States Securities and Exchange Commission announced that on December 29, 2008, it filed an emergency action to halt a Ponzi scheme and affinity fraud conducted by Creative Capital Consortium, LLC and A Creative Capital Concept$, LLC (collectively, Creative Capital), and its principal, George L. Theodule.

According to the Commission's complaint, the defendants raised at least $23.4 million from thousands of investors in the Haitian-American community nationwide through a network of purported investment clubs Theodule directs investors to form.

Also on December 29, 2008 Judge Donald M. Middlebrooks, U.S. District Judge for the Southern District of Florida, issued an order placing Creative Capital under the control of a receiver to safeguard assets, as well as other emergency orders, including temporary restraining orders and asset freezes.

The Commission's complaint alleges that starting in at least November 2007, Theodule, directly and through Creative Capital, raised at least $23.4 million from thousands of investors, mostly Haitian-Americans.

As part of the scheme, the defendants direct investors to form investment clubs solely for the purpose of funneling funds to Theodule and Creative Capital. Theodule solicits investors for Creative Capital by guaranteeing a 100% return on their investment within 90 days based on his claimed successful trading of stocks and options.

The defendants also solicit investors by claiming that Creative Capital's trading profits are used to fund new business ventures, some of which benefit the Haitian community in the United States and Haiti, and others in Sierra Leone.

In truth, Theodule has lost at least $18 million trading stocks and options just over the last year. In addition, Creative Capital merely repaid earlier investors with monies collected from new investors in typical Ponzi scheme fashion.

Finally, the Complaint alleges, Theodule has commingled investor funds with his personal funds and misappropriated at least $3.8 million for himself and his family.

The Commission's complaint further alleges: Defendants' statements of the safety and security of investor deposits are patently false. Theodule directs prospective investors to form investment clubs with the assistance of a purported self-regulatory agency called Smart Investment Management Services, LLC (SIMS). Defendants tout SIMS' independent verification of their deposits as an added measure of safety and security.

In reality, SIMS is a private company run by a former Creative Capital employee and not a regulatory entity.

Defendants' claim of success trading stocks and options are also false. Of the more than $18 million deposited in brokerage accounts, Theodule has lost approximately 97% of those funds trading stocks and options.

In fact, Theodule has consistently lost money trading in those accounts since November 2007, and has never generated net trading profits. Defendants' claims that Creative Capital's trading profits were used to fund new business ventures, some of which would benefit the Haitian community in the United States and Haiti, and others in Sierra Leone are false.

In reality, there were no trading profits, and most of the funds the Defendants disbursed went to pay earlier investors their purported profits, not fund business projects.

Moreover, the Defendants misappropriated millions of dollars of investor funds. In addition to the emergency relief obtained today, the Commission's complaint seeks disgorgement of the defendants' ill-gotten gains, civil penalties, and permanent injunctions barring future violations of the antifraud provisions of the federal securities laws.

Full post as published by Misleading Advertising Law on December 30, 2008 (boomark / email).